Inheritance

[Guest spock]

One thing I hope won't come any time soon is the death of my parents.

 

However, when it does, the proceeds from their house will be shared between myself and my brother. I'm hoping to be in Australia by then.

 

Does anyone know rules governing inheritance? Hopefully it's not all treated as capital gains.

 

Any ideas? Thanks,

 

 

Spock.

[Guest montbrehain]

Im not an expert by any means . But when my grandmother died the Govt took £40,000 from her estate because her property was worth more than £240,000. ( a home she had given £1500 for in 1951) I believe the limit is now £270,000. many many elderly people (and their families) are going to be hit with this , As house prices skyrocket in this country. Its just another "Rip off" in this country.

The latest I hear is best of all ! if you were lucky enough to own a house with a big garden that has development possibilities ? get it done soon !! The govt are introducing a "development tax" meaning if you sell your property for building ? they want up to 40% of the profit !!! Great country this !!!! you work your ass off to pay for your home , and have the luck for it to come in to building. Only for the govt to tax it. YET AGAIN !.

I believe I am right in saying that Aussie has no Inheritance tax ? and that what you leave to your family they get ? can anybody confirm this ? Cheers "MO"

[Guest spock]

Hi MO,

 

Are you talking about the UK or Oz government here? Sounds like the UK.

 

Parents have done an incremental will, so that the whole estate is not passed down at the same time and so shouldn't cross the tax threshold).

 

Assuming this is the case, what I'm asking is, will this sum be subject to ank kind of Australian tax? If they don't have inheritance tax, it sounds suspiciously like they'll treat it for capital gains tax.

 

Any ideas anyone?

 

By the way, I agree about the UK inheritance laws. Not only thiose, but all fixed level thresholds. Upper tax bracket for example used to be for really high earners. Not any more. Salaries/inflation now means that the government gets loads more money out of ordinary people - so they're not in a hurry to do anything about it. It should have gone up all along in line with inflation.

 

Rant over.

 

Cheers,

 

Spock.

[Guest dwaldron]

No your inheritance is not subject to any type of tax in Australia. Obviously if your parents pop their clogs while UK residents then Gordon will be wanting his share.

[Guest spock]

Thanks a lot.

 

Cheers,

 

Spock.

[Guest BullcreekBob]

 

Assuming this is the case, what I'm asking is, will this sum be subject to ank kind of Australian tax? If they don't have inheritance tax, it sounds suspiciously like they'll treat it for capital gains tax.

 

Any ideas anyone?

 

 

 

G'day

 

I have lots of ideas, how many do you want?

 

However, first, a few facts. Australia does not have an inheritance tax. If your parents die in the UK as UK residents, then Australian law will not apply in any way, just Mr Brown's needs will be seen too. If your parents leave you some assets and you bring them to Australia you will not be taxed on the inheritance but import duties could apply if you bring in cars and various other non household effects. There are no problems bringing in Money and no taxes are applied to it. If you put the money into a bank account and earn interest on it, then you will be assessed income tax on the interest earned.

 

As I said earlier, Aust does not have an inheritance tax, but death is considered to be a Capital Gains Tax event. So if you have a relative, friend, stranger, who is an Australian resident for tax purposes and they die leaving it all to you. Capitals Gains Tax could be assessed on the non CGT exempt components of their estate. This area is starting to get murky so I'd suggest a proper sit down with a financial advisor.

 

If a relative in the UK dies and leaves a house to you, then you can also be assessed for CGT on any increase in value of that house between the time the house passed to you (time of death), and the time when it was sold. For example if a house being left to you was valued at 200,000 UKP at the time of death, but the executor sold it later for 250,000 UKP, then you will be charged CGT on the 50,000 UKP

 

Ouch, my brain hurts - not used to thinking on a Saturday morning.

[Guest spock]

You've come to the rescue again Bob.

 

That's exactly what I needed to know.

 

Many thanks once again.

 

Spock.

[Guest spock]

On a slightly related issue, what about life insurance?

 

Life insurance is more expensive, the older you get. So I prefer to stick with the one I have in the UK.

 

Now in case of my untimely and tragic death, my better half would be in Oz and in great need of the insurance payout.

 

Now that the scene is so delicately set, my question is, would this be subject to Australian capital gains tax? If so how much of it?

 

Alternatively, if I took out Australian life insurance, would this also be subject to capital gains tax?

 

Cheers,

 

Spock.

[Alan Collett]

The important issue to remember in the context of UK Inheritance Tax is that is is determined by what is called your domicile - not by your tax residency. Domicile is one of those attributes that is very difficult to shake off (the UK Revenue take some persuading), so you can remain domiciled in the UK for many years after you have departed to live in Australia.

 

And if you retain a UK domicile you retain an exposure to UK Inheritance Tax. This would usually become an issue upon your decease, when your executors (assuming you have a Will) would be required to present an account of the deceased's estate and to settle any IHT payable before they can secure probate, which in turn is needed before the executors can deal with the estate in accordance with the Will.

 

By contrast, if you are a non-UK domiciled person you have a liability to UK IHT if you have any estate that is located in the UK (eg real estate).

 

In saying all this, remember that UK IHT is only payable on estate plus gifts that are what is called Potentially Exempt Transfers made within 7 years of death when the estate is valued at (from 06/04/2007) £300,000 (I recall).

 

Estate that passes to a surviving spouse passes on a free of UK IHT basis, unless the spouse is a non-UK domiciled person, in which case the amount that can pass on a free of IHT basis is capped at the nil rate band (the £300,000 mentioned above), plus £55,000.

 

Also, debts (eg a mortgage loan) will reduce the amount of the estate that is chargeable to IHT.

 

This is necessarily a very brief explanation of the application of UK IHT - as always I recommend persons concerned take professional advice, particularly if:

 

1. Your net estate is valued at more than the nil rate band, and/or

 

2. You have a non-UK domiciled spouse (often the case for those migrating as the holders of a spouse visa).

 

Those concerned should feel able to contact me for further information - I usually don't get involved in detailed IHT planning, but a colleague of mine does.

 

Best regards.

[Guest spock]

Lots to consider.

 

Thanks Alan.

 

Spock.