Removal of the 50% CGT Discount for Non-Residents
Estate Planning Update – Autumn 2013
Australian CGT is payable even when an asset has merely kept pace with inflation. For Australian individuals and Australian controlled trusts, the incidence of CGT is at least reduced by the general 50% discount for assets held for more than 12 months, as well as any other CGT concessions that might apply such as the main residence exemption and the small business CGT concessions.
For a long time, the general 50% discount was also available for non-resident individuals and non-resident controlled trusts, but that exemption will now cease for future financial years.
This can be a disadvantage for an individual who is presently overseas, but with plans to return to live in Australia at some point in the future. Wills benefitting that beneficiary can be drafted to ensure the executor is given the option to place any inheritance that may pass for the primary benefit of that beneficiary, in an Australian resident controlled trust for the period while the beneficiary is still contemplating returning to live in Australia. Similarly, the control of an existing family trust may be varied so that the trustee remains an Australian resident controlled trustee during that “contemplation” period.