The Australian jurisdiction has specific taxation laws when concerning inheritance and can have significant implications on foreign executor’s as well as the beneficiaries of the estate. There are distinct disadvantages of appointing a non-resident Executor in Australia.
The disadvantages of appointing a foreign executor can create issues in the areas of practicality and taxation.
The issue of practicality creates the obvious hurdle of physical proximity between jurisdictions. Administering an estate usually requires detailed completion and execution of documents in the presence of a qualified witness. Further, there is the task of physically attending to estate administration requirements, such as assessing estate assets and sale of same. This can be a major hurdle where an executor is not present in Australia. This can create barriers in punctual and effective estate administration. In addition, differing time zones and potential language and cultural nuances can impede the flow of administration and contact between the executor and third parties assisting in the estate administration.
The second issue of taxation is probably the most significant implication to consider. Australian residents who dispose of real property can enjoy taxation benefits in most cases, however, if the executor is deemed a foreign resident, then those tax benefits might not be available.
For example, when dealing with real property the executor may have a Foreign Capital Gains Withholding Tax applicable to the sale of real property that exceeds $750,000. Furthermore, if the executor is classed as a foreigner for tax reasons, then the estate may be treated as such and be excluded from accessing the tax-free threshold.
Another added layer of complexity is associated with Trusts created under Wills. If the executor is a foreign resident, then the Trust created under the Will can be treated as a foreign entity for the purposes of Foreign Investment Review Board approval to transfer real property to the Trust.
While appointing a foreign executor is not prohibited in Australia, it does come with significant implications and effective administration requires a firm understanding of the Australian legal landscape. Therefore, if a foreign executor has been appointed, it would be highly recommended to appoint another executor who is an Australian resident to aid with the effective administration of the estate and as to avoid the issues addressed above.
