AUSTRALIA Trends and Developments Contributed by: William Moore, Frank Hinoporos, Emma Woolley and Todd Bromwich, Hall & Wilcox
Overseas Assets Many Australians spend time living overseas and often acquire assets overseas, or may have children who spend time living overseas. Conversely, many Austral - ians may have originally come from another country and may retain assets in their country of birth. These trends reflect a growing complexity in personal asset portfolios that span multiple jurisdictions. The ownership of overseas assets introduces sig - nificant legal challenges in estate planning. Different countries apply different laws to asset succession, which can complicate the administration of an estate. In Australia, assets are classified as either immovable property (such as real estate) or movable property (such as cash, shares and personal belongings). The law governing succession depends on this classifi - cation and the individual’s domicile, which is a legal concept referring to the country a person considers their permanent home. For movable assets, the law of the domicile at the time of death applies. For example, if someone dies domi - ciled in New South Wales (NSW), NSW law governs the succession of their worldwide movable assets. However, immovable assets are governed by the law of the country where the property is located. A house in Italy, for instance, would be subject to Italian suc - cession laws, which may differ significantly from Aus - tralian laws. Given the jurisdictional differences in succession laws, it is often advisable to have separate wills for assets held in different countries. While not strictly necessary, this approach offers two major benefits: • first, it can streamline the probate process by allowing probate to be granted simultaneously in multiple jurisdictions, avoiding delays associated with resealing a single will across borders; and • second, it allows for tailored tax planning, enabling each will to be structured in a way that optimises tax outcomes under the laws of the relevant coun - try. Estate planning for international assets should also include local incapacity documents, such as powers of attorney. These documents are jurisdiction-specific;
a global or universal power of attorney is not legally recognised. Preparing appropriate documents in each country ensures that your affairs can be managed effectively if you become incapacitated. High net worth individuals with personal portfolios spanning multiple jurisdictions should obtain advice on the tax regimes that apply in each relevant juris - diction, including the tax consequences associated with their residency status and any changes to that status. Australian tax residents must declare all over - seas income, such as foreign rent, dividends, inter - est, capital gains and trust distributions, in their tax return. However, individuals should be aware that such income and assets may also be subject to taxa - tion in another jurisdiction, depending on the domes - tic tax laws of that jurisdiction and the individual’s tax residency status. This may be particularly relevant to individuals who are relocating to Australia and under - going tax residency changes. Some jurisdictions (like Australia) impose an “exit tax” when an individual ceases to be tax resident, effectively taxing gains that accrued during the period in which the individual was subject to that jurisdiction’s tax system before relocat - ing elsewhere. Tax treaties play a critical role in managing cross- border tax exposure. They determine an individual’s treaty residence, allocate taxing rights between the relevant countries, reduce or eliminate instances of double taxation, and clarify the tax treatment of par - ticular categories of income and gains. Accordingly, a thorough understanding of the interaction between domestic tax laws and applicable tax treaties is an essential component of effective international tax planning. Digital Wealth There is no specific legislation in Australia covering digital assets in succession, and terms of service vary widely between platforms. Without clear plan - ning, access to digital accounts and assets can be blocked, causing distress, disputes and financial loss. A clear plan will help manage against:
• disruption to a digital business; • the potential for costly disputes;
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