Foreign Beneficiaries and the FIRB

Foreign Beneficiaries and the FIRB

There used to be an exemption for property acquired under a Will. That changed in January 2021 when that exemption was removed. A beneficiary of Australian property under a Will who is not ordinarily resident in Australia (which includes both foreign citizens and Australian citizens residing overseas) is now required to obtain approval from the Foreign Investment Review Board within 30 days of obtaining an interest in Australian property. There is a fee associated with obtaining that approval which is based on the value of the property. For example, for properties valued under $1,000,000 the fee is currently $13,200. This fee cannot be paid by the estate and will be required to be paid by the beneficiary. If the property is an established dwelling, the foreign person would most likely not receive approval unless redevelopment will be occurring on the property.

A testamentary trust established under a Will can also be considered a foreign person if an individual not ordinarily resident in Australia hold a substantial interest in the trust.

This new regime needs to be considered carefully when you are preparing or reviewing your Will. Depending on the assets in your estate, this restriction can be accommodated by ensuring a foreign beneficiary receives non-real property assets from your estate. Also, an executor can sell the property and then distribute the funds from the sale to the beneficiaries.

Penalties can apply if these conditions are not complied with.

This is a very brief overview intended only to flag some of the estate planning issues that arise when considering leaving real property to foreign beneficiaries. Please give us a call so we can talk through your particular circumstances.

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