11/06/2019 1 12 JUNE 2019 Australian Tax for New Zealand clients What we will cover 2 • Basic overview • Tax residency • Capital Gains Tax • Pensions and superannuation • Lump sum payments • The double tax agreement; implications for interest income, employment income and business income • Trading from New Zealand into Australia • GST issues • Trust issues, including deceased estates and payments out of NZ trusts to Australian residents
Transcript
11/06/2019
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12 JUNE 2019
Australian Tax for New Zealand clients
What we will cover
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• Basic overview
• Tax residency
• Capital Gains Tax
• Pensions and superannuation
• Lump sum payments
• The double tax agreement; implications for interest income, employment income and business income
• Trading from New Zealand into Australia
• GST issues
• Trust issues, including deceased estates and payments out of NZ trusts to Australian residents
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• Residents and non-residents are treated differently• Residents are taxed on all worldwide income
• Non-residents are taxed only on Australian sourced income
• Tax rates are different for residents and non residents• Non-residents do not get the tax-free threshold ($18,200)
• Non-residents pay tax at 32.5% from the first dollar of income up to $90,000
• Non-residents pay tax on bank interest at flat 10% rate (withheld by the financial institution)
• Non-residents liable for CGT only on “real property” (eg Australian land and buildings), not shares and other investments
Residency: why does it matter?
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An overview of the residency rules – primary test
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• Main test is the “resides” test” (Section 6(1) ITAA 1936)• “To dwell permanently, or for a considerable period of time, to have one’s settled or usual abode, to
live, in or at a particular place” Shorter Oxford Dictionary
• Take into account (TR 98/17):• Intention and Purpose of Stay
• Family and business/employment ties
• Maintenance and location of assets
• Social and living arrangements
• Physical presence in Australia
• If taxpayer passes the “resides” test, they are resident and no further tests need be considered
• If taxpayer fails the “resides” test, consider the other three tests. If any ONE of those tests is passed, the taxpayer is resident
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An overview of the residency rules – statutory tests 1
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• Remember: Only consider these tests if the taxpayer is not resident under the primary “resides” test
• Domicile test:
• Your domicile is the place that is:
• considered by law to be your permanent home
• usually something more than a residence.
• You may have no fixed place of abode but under the law you will always have a domicile. You can only have one domicile at the one time, whereas you may be resident in two or more places.
• There are three basic types of domicile which can change and override each other:
• Domicile of origin
• Domicile of choice
• Domicile by operation of law
An overview of the residency rules – statutory tests 2
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• 183 day test• Physically present in Australia for more than 183 days in a year
• Need not be continuous
• Does not apply if your usual place of abode is outside Australia
• Superannuation test• Eligible employee under the Superannuation Act 1976 or the spouse or child under 16 of
such a person
• Typically current public servants (but not former ones)
• See IT 2650 and IT 2681 for more detail
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Temporary resident – what is a temporary resident?
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• You are a temporary resident if (s995-1 ITAA 1997):• You hold a temporary visa under the Migration Act 1958 (for example, a 457 visa) and
• You (and your spouse) are not an Australian resident within the meaning of the Social Security Act 1991 (SSA), i.e: you reside in Australia and are
• an Australian citizen
• the holder of a permanent visa
• a protected special category visa holder
• TIP: If spouse is an Australian resident within the SSA, you are not a temporary resident even if you hold a temporary visa
Temporary residents – how are they taxed?
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• Temporary residents are only taxed on:• Australian source income (e.g employment income, bank interest and dividends)
• Certain short term foreign employment income
• Temporary residents are not taxed on most foreign income (so overseas bank interest, dividends, rental income and capital gains are not taxed)
• Temporary residents are exempt from Australian CGT (except where the asset is Taxable Australian Property such as an Australian investment property)
• If temporary resident applies for permanent residency or citizenship, worldwide assets come into Australian tax net at market value at date of application (which defers tax entry point compared to similar permanent migrants)
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New Zealand citizens
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• When New Zealand citizens enter Australia, they receive a “special category visa (SCV)” allowing them to remain and work in Australia but not re-enter if they leave.
• This is a temporary visa (TD 2012/18)
• Where New Zealand citizens entered Australia after 26 February 2001 (on a SCV) and have NOT applied for permanent residency or taken Australian citizenship, they will be treated as temporary residents for tax purposes no matter how long they stay in Australia (even for decades).
• This means that qualifying New Zealanders are not taxed on most foreign (including New Zealand) income and are excluded from Australian CGT except where the asset is TAP.
• This does not apply where the New Zealand citizen is married to (or in a de-facto relationship with) an Australian resident.
• Exemption does not apply to a holder of a Protected Special Category Visa
• A New Zealand citizen residing in Australia on February 26 2001 or
• A New Zealand citizen who was in Australia for more than 12 months in the two year period up to February 26 2001
Example (from TD 2012/18)
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Murray is a citizen of New Zealand and holds a current New Zealand passport.
In November 2008 he travelled from New Zealand to Australia and became an 'Australian resident' within the meaning of subsection 995-1(1) of the ITAA 1997. However he has never been an Australian resident within the meaning of the Social Security Act 1991 (a ' Social Security resident') and he does not have a spouse.
When Murray entered Australia he was granted a temporary visa known as a ' Special Category Visa' under section 32 of the Migration Act
Special Category Visas are granted to New Zealand citizens upon presentation of a current New Zealand passport. Such a visa allows the holder to remain in Australia while they are a New Zealand citizen but ceases to be in effect when they leave Australia.
In January 2011 Murray travelled back to New Zealand for three weeks and his Special Category Visa thereby ceased to be in effect. However Murray was granted another Special Category Visa when he returned to Australia and re-presented his New Zealand passport .
Although his Special Category Visa ceased to be in effect when he travelled back to New Zealand, Murray is still treated as holding a temporary visa during that time. This is because he continued to be entitled to re-enter Australia on presentation of his current New Zealand passport.
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• Mr A is an Australian tax resident who owns a rental property in New Zealand. Will the income (or loss) need to be included in the Australian tax return for Mr A? Also will it be subject to CGT on sale?
• Consider if Mr A is temporary resident for tax purposes
• If so, section 768-10 ITAA 1997 ensures that temporary residents are only taxed on Australian sourced income, except for income relating to employment or personal services overseas while a temporary resident. This means that foreign sourced rental income is not taxed in Australia.
• Any capital gain or loss relating to land and buildings overseas are disregarded for Australian tax purposes because those assets are not TAP (section 768-915)
• If Mr A is not temporary resident, he will be subject to Australian tax on the foreign income as well as subject to CGT on the disposal
• In relation to the CGT liability, if the property was acquired while the client was a non-resident the cost base of the NZ property will be based on its market value at the later of when the client became an Australian resident or when they ceased being a temporary resident.
Case study
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Working holidaymakers
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• From 1 January 2017, all working holidaymakers on visa types 417 and 462 are taxed at a rate of 15% on all income from the first dollar up to $37,000. For income from $37,001 onwards, normal tax rates apply (32.5% for income up to $87,000).
• These rates apply regardless of whether the taxpayer satisfies the normal tests for residency/non-residency outlined earlier.
• Residency/non-residency may still be relevant for determining tax treatment of other income (eg capital gains, overseas income)
• Working holiday-makers departing Australia permanently are entitled to receive a refund of superannuation contributions paid by their ex-employers on their behalf. This refund is payable after the working holidaymaker has left the country.
• From 1 July 2017, the refund is subject to a tax deduction of 65%.
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Poll
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• Bob, a New Zealand citizen, moves to Australia on 5th April 2007 with his wife, Elaine, a British citizen. He remains in Australia permanently, apart from short visits to family in New Zealand. Neither Bob not Elaine apply for permanent residency or citizenship in Australia. What is Bob’s most likely residency status for tax purposes?
• a) Resident
• b) Non-resident
• c) Temporary resident
Tax Residence for companies
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• A company will be a resident of Australia if:
• it is incorporated in Australia; or
• it both carries on business and has its central management and control in Australia; or
• it both carries on business in Australia and has its voting power controlled by Australian resident shareholders.
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What if an individual is resident in both Australia and New Zealand?
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• Tie-breaker clause in DTA:• Individual is a resident where their permanent home is located
• If no permanent home (or a permanent home in both countries) individual is resident where personal and economic relations are closer (centre of vital interests test)
• If centre of vital interests test is inconclusive, residence is where the individual has habitual abode
• If no habitual abode (or habitual abode in both countries), residence is where the individual is a national
Coming to Australia
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• Once resident, taxpayers must disclose all worldwide income earned from date of arrival:
• Interest on overseas bank accounts
• Foreign pensions
• Rent from investment properties
• Disposals of foreign assets
• Shares/proceeds from employee share schemes
• Wages and salaries
• Foreign tax offset may be available to avoid double taxation
• Money brought into Australia when taxpayer first arrives is not taxable (e.g overseas savings, profits from asset disposals)
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CGT: Taxable Australian Property
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• Important concept when considering residency, especially in the context of capital gains tax (CGT)
• TAP includes:• Land and building situated in Australia (eg family home, residential or commercial
investment property, land (including farmland), and mining, prospecting and mineral rights
• CGT asset used to carry on business through an Australian permanent establishment (ie, most business assets)
• TAP does not include:• Shares in Australian listed companies
• Overseas assets such as land and buildings, shares, etc
CGT for arriving residents
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• CGT assets are deemed to have been acquired on the date the taxpayer became resident in Australia (possibly – but not necessarily – the date of arrival)
• Taxpayers will need to get a market valuation of any assets that may be subject to CGT – such as property, shares, business interests, personal items like jewellery – which they owned on the date of entry to Australia (or the date they became resident, if later)
• If the asset is already TAP (such as real estate located in Australia) it is already in the Australian tax system and a valuation is not required
• After that, normal CGT rules apply
• Assets must be held for 12 months from date of becoming resident in order to obtain the 50% discount
• If taxpayer arrives as a temporary resident, assets are deemed acquired on the date they become full tax residents
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CGT for arriving residents - example
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• Bill, a New Zealand citizen, moves permanently to Australia on 1 January 2017 with his Australian wife, Susan.
• They own the following assets:• Property in Auckland bought for $500,000 in August 2010 (current market value $1 million)
• Property in Melbourne bought for $375,000 in May 2012 (current market value $675,000)
• Shares listed on the Australian stock exchange at various dates, original cost $175,000 (current market value $240,000)
• The Melbourne property is TAP and already in the Australian tax net.
• The Auckland property and the shares are not taxable Australian property and are deemed acquired on 1 January 2017 for their current market value.
• NB: Bill will not qualify as a temporary resident because his wife is an Australian tax resident from the date of arrival.
CGT for departing residents
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• CGT event I1 happens
• All CGT assets are deemed to be disposed of at market value, except TAP
• Taxpayer may elect to disregard deemed disposal (s104-165(2))
• No deemed disposal happens and assets remain with Australian tax net
• Election is “all or nothing”; all CGT assets must be included
• The way the tax return for the period of departure is completed is evidence of whether or not the election is made
• Issues for clients:
• If no election is made, need to pay tax on an unrealised gain
• If an election is made, need to pay on all future value up to disposal, even though no longer resident
• Consider whether value of asset is expected to rise or fall; if value is expected to fall, consider election
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Foreign resident CGT withholding
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• From 1 July 2017, there is a CGT withholding rate for foreign tax residents of 12.5 percent payable on disposals of Australian property with a market value of $750,000 or more. Relevant in relation to contracts entered into on or after 1 July 2017.
• When a NZ investor sells Australian property (eg a holiday home or other rental property), the purchaser is required to pay 12.5 percent of the first element of the cost base of the CGT asset to the Commissioner. The first element of the cost base of the CGT asset is usually the purchase price of the asset. In addition, under the changes this amount may be withheld from the payment the purchaser makes to the vendor.
• This tax obligation will not arise if the market value of the Australian real property (including direct and indirect interests) is less than $750,000.
Pensions and superannuation
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• Per section 27H ITAA 1936, annuities and pensions paid from a foreign superannuation fund or foreign scheme for the payment of superannuation benefits are included in assessable income
• In addition, article 18 of the Australia/NZ DTA states that pensions (including government pensions) are generally taxable only in the country of residence, ieAustralia
• This includes:• Superannuation annuities
• Life annuities
• Periodic workers compensation
• Pensions and annuities paid to dependants, eg widow or children under 18
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Pensions and superannuation (cont’d)
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• Per the DTA, pensions and other similar remuneration are NOT taxed in Australia to the extent that the income would not have been taxed in NZ if the recipient had been resident in NZ
• This exemption does not include instances where no tax is payable in NZ merely because the individual’s total income falls below the NZ tax free threshold for residents
• This exemption also excludes portable NZ superannuation, portable veterans pensions or equivalent portable payments arising in NZ
• Portable NZ superannuation is paid by the NZ government to recipients living overseas and is made exempt under NZ domestic law to ensure that the country of residence can tax it
• Such payments are therefore taxable in Australia
Lump sum payments
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• Per Article 18 of the DTA, the term “pension” excludes lump sum payments.
• Such payments are taxable only in NZ
• This includes lump sums arising under a retirement benefit scheme or in consequence of:
• Retirement
• Death
• Disability
• Although not taxed in Australia, such payments are still taken into account for the purposes of calculating Centrelink benefits, such as the Age Pension
• Although taxing rights on alimony and maintenance payments arising from a relationship breakdown are given to Australia only by the DTA, such payments are exempt income under Australian domestic law.
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Other key issues from the DTA
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• Business Profits (Article 7) – If a NZ business carries on a business through an Australian permanent establishment (such as an office or warehouse), Australia will seek to tax the profits of that business. If there is not a permanent establishment, there is no Australian tax
• Interest income (Article 11) – non-exclusive taxing rights to Australia where Australian interest is paid to a NZ resident. Tax rate is generally 10% and will be withheld by the financial institution.
• Employment income (Article 14) – income not taxable to a NZ resident where:
• Employee is in Australia for a period not exceeding 183 days in 12 months and
• Remuneration is paid by NZ employer
• Cost is not passed on to an Australian permanent establishment of the employer
• Secondments (Article 14) – income not taxable in Australia where NZ resident is seconded to Australia for a period not exceeding an aggregate of 90 days in 12 months
New Zealand residents trading over the internet
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• What might be the Australian tax liabilities of a NZ entity trading over the internet with customers in Australia?
• Probably no income tax since no permanent establishment
• Probably no GST – but see later slide for exceptions
• No liability for CGT since probably no taxable Australian property
• No superannuation of fringe benefits tax obligations unless Australian workers are employed
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When will a NZ entity need to register for GST?
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• You must register for GST in Australia if both of the following apply:• you are carrying on an enterprise
• your GST turnover from sales that are connected with Australia and made in the course of your enterprise is equal to, or greater than, the registration turnover threshold of A$75,000.
• From 1 July 2017 a sale of something other than goods or real property is connected with Australia if any of the following apply:
• the purchaser is an Australian consumer
• the product/service is performed in Australia
• you make the sale through an enterprise that you run in Australia
• you sell a right or option to purchase something that is connected with Australia.
When will a NZ entity need to register for GST?
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• For example, a sale is connected with Australia if it is:• a digital product, such as software or an eBook, sold to an Australian consumer
• services, such as consulting services, sold to an Australian consumer.
• A sale of goods is connected with Australia if any of the following apply:
• offshore supplies of goods are made (except for tobacco products or alcoholic beverages) that have a customs value of A$1,000 or less when the price is first agreed with the customer
• the goods are sourced from within Australia and delivered or made available in Australia to the purchaser
• the goods are removed from Australia
• the goods are imported into Australia.
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Australian taxation of New Zealand dividends
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• Ordinarily, Australians residents receiving dividends from New Zealand companies will be liable to pay Australian income tax on the dividend.
• The full amount of the dividend must be included at item 20 Foreign source income and foreign assets or property on the tax return. This means the amount paid or credited plus the amount of any NZ tax which has been deducted. A foreign income tax offset may be available for the NZ tax paid.
• For a shareholder of a New Zealand franking company that has paid a dividend that is franked with Australian franking credits, a franking tax offset may be available
Trans-Tasman imputation
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• The Trans-Tasman imputation measures allow a New Zealand (NZ) resident company to choose to enter the Australian imputation system and gain access to Australian franking credits. Primarily, this will be when a NZ company pays Australian income tax.
• The measure allows a NZ company to maintain an Australian franking account and to attach Australian franking credits to dividends it pays to its Australian shareholders. These Australian franking credits can then be passed on to Australian shareholders, who have invested in the NZ company in Australia.
• The measure does not allow recognition of NZ imputation credits attached to dividends received by Australian resident shareholders.
• A NZ resident company must give notice to the Australian Commissioner of Taxation that they wish to be part of the Australian imputation system. This will remain in force until revoked by the company or cancelled by the ATO
• Australian shareholders must include the dividends paid by a NZ company and the attached Australian franking credits in their assessable income. Any supplementary dividend paid by the NZ company is also included in assessable income.
• The Australian shareholder is entitled to a tax offset, equal to the franking credits included in their assessable income, against Australian income tax payable on the dividend. They are also entitled to a foreign income tax offset, in respect of any NZ withholding taxes, against Australian income tax payable on the dividend.
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Trusts
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• For the purposes of the provisions relating to the taxation of trusts, other than the capital gains tax provisions, a trust is a resident of Australia for an income year if one of the following applies at any time during the income year:
• (a) the trustee is an Australian resident; or
• (b) the central management and control of the trust is in Australia.
• So, if one of the trustees is an Australian resident, the trust is Australian resident.
• The rules are the same for capital gains tax purposes except with regard to unit trusts. A unit trust is a resident trust if one of the following requirements is met:
• (a) any property of the trust is situated in Australia; or
• (b) the trust carries on a business in Australia; and one of the following additional requirements is also met:
• the central management and control of the trust is in Australia; or
• Australian residents hold more than 50% of the beneficial interests in the income or property of the trust.
Trust residency
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• Residency status of the settlor of the trust and the location of trust assets is not relevant to the residency of the trust.
• A trust may be established by an Australian tax resident for assets wholly located in Australia and still be a non-resident trust because the trustee is non-resident or the trust is centrally managed and controlled outside Australia
• Dual residents:• For entities other than individuals, see DTA Article 4, para 3
• Entity is deemed to be a resident of the country in which its “place of effective management” is situated
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Taxation of income of a non-resident trust
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• Where distributions are made, it is the beneficiaries of the non-resident trust who are taxed on distributions (except where the distribution is to a beneficiary under a legal disability)
• Per section 97 ITAA 1936, the assessable income of an Australian resident beneficiary will include their share of a trust estate to which they are presently entitled.
• Example:
• Amy and Jonathan are Australian resident beneficiaries of their mother’s non-resident estate. Amy is to receive a house and Jonathan a share portfolio, with the residue to be divided equally. At the end of 2018, the residue has not been determined and no distributions have been made. Therefore neither Amy nor Jonathan will be presently entitled to the income of their mother’s estate and section 97 will not apply.
• In the following tax year, the residue is determined and all the assets of the estate are distributed to Amy and Jonathan, who will be presently entitled to a share of the income of the estate in 2019.
Capital distributions from NZ trusts to Australian residents
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• Refer ATO TD 2017/23 and TD 2017/24 and section 99B ITAA 1936
• The tax determinations confirm:• Only TAP capital gains are taken into account when working out the Australian capital
gains tax (CGT) position of a foreign trust.
• Amounts attributable to non-TAP capital gains from the trust will be assessable upon distribution to an Australian resident beneficiary. However, the amounts will not be treated as capital gains of the Australian beneficiary and accordingly can't be reduced by the CGT discount or by capital losses.
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Capital distributions from NZ trusts to Australian residents
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• S.99B(1) provides:
• “Where, at any time during a year of income, an amount, being property of a trust estate, is paid to, or applied for the benefit of, a beneficiary of the trust estate who was a resident at any time during the year of income, the assessable income of the beneficiary of the year of income shall, subject to subsection (2), include that amount.” [Emphasis added]
• Although the legislative extract above does not specifically make reference to non-resident trusts, by far the most common example of S.99B(1) applying is in the case of a non-resident trust making a payment to a resident beneficiary, where the amount has not already been subject to tax in Australia.
• Most commonly, such amounts have not been included in the assessable income of the non-resident trust when:
• the non-resident trust derives non-assessable foreign sourced income; and
• a non-resident trust has disregarded a capital gain on a CGT event in relation to a CGT asset that is not TAP.
Capital distributions from NZ trusts to Australian residents
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• Section 99B(1) operates on the assumption that all amounts paid to (or applied for the benefit of) resident beneficiaries is to be included in their assessable income, subject to certain exclusions contained within S.99B(2). Most relevantly, these exclusions include:
• (a) Corpus of the trust estate. However, this exclusion does not apply to the extent it is attributable to amounts derived by the trust that (hypothetically) would have been included in a taxpayer’s assessable income, had that taxpayer been a resident taxpayer.
• On this basis, the exclusion will not apply where a foreign trust has not included certain amounts from its assessable income because it is a non-resident (e.g., capital gains disregarded as they relate to CGT assets that are not TAP). Refer to S.99B(2)(a).
• (b) An amount that, had it (hypothetically) been derived by a resident taxpayer, would not have been included in that taxpayer’s assessable income (eg a gain arising on the disposal of a pre-CGT asset). Refer to S.99B(2)(b).
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EXAMPLE – Section 99B applies to beneficiary payment
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• Tom, an Australian resident, is a beneficiary of a NZ Trust, the TRK Trust.
• In the 2015 income year, the TRK Trust makes a $100,000 capital gain from the sale of a property situated in New Zealand. This capital gain was disregarded by the TRK Trust, as it is a foreign trust for CGT purposes and the New Zealand property is not TAP.
• The $100,000 has been treated as a capital item and therefore forms part of the corpus of the trust.
• This $100,000 amount is paid to Tom in the 2017 income year.
• Will S.99B of the ITAA 1936 apply to the distribution?
• Yes. Although the $100,000 represents corpus of the TRK Trust, the corpus exclusion contained in S.99B(2)(a) does not apply. Had a resident taxpayer hypothetically derived the amount, the $100,000 would be included in such a taxpayer’s assessable income (at least to some extent).
• As no exclusion in S.99B(2) applies, Tom will include an amount in his assessable income under S.99B(1) in the 2017 income year (i.e., the year he received the payment).
EXAMPLE – Resident beneficiary assessed under S.99B
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• In June 2015, the trustee of the Premier Trust, a NZ trust for CGT purposes, disposes of shares in an Australian public company it had owned for seven years. A capital gain of $30,000 arises on the disposal of the shares, which are not TAP.
• In January 2017, the trustee pays Marcus $30,000, which is attributable to the capital gain made by the Premier Trust in the 2015 income year. Marcus, a resident of Australia at all times, has a $20,000 net capital loss he has carried forward from the 2016 income year.
• The following income tax consequences arise for this series of events:
• the $30,000 capital gain is disregarded by the Premier Trust in the 2015 income year under S.855-10;
• no amount referable to the capital gain is included in Marcus’ income in the 2015 income year (i.e., the year the capital gain arises for the Premier Trust);
• Marcus will include the entire $30,000 in his assessable income in the 2017 income year under S.99B(1); and
• Marcus is not able to reduce the assessable amount by either his carried forward capital losses or the 50% CGT discount.
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Practical overview of Section 99B
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• The starting position is that all NZ trust distributions – income or capital – to Australian resident beneficiaries are taxed in their hands subject to the two specific exclusions in section 99B.
• This can produce highly negative outcomes for clients. For example, if a child migrates to Australia and subsequently receives a capital distribution from their parents NZ trust, the starting point is that the capital amount is included in the child’s assessable income.
• If the overseas trust had accumulated income for 30 years, a significant amount of the trust’s capital may be attributed to an amount that would have been assessable income if derived by an Australian resident. If that accumulated capital is distributed to Australian resident beneficiaries, it may be caught by section 99B.
• It doesn’t matter if the child has only just become Australian resident. The capital distribution would still be caught even if the capital was accumulated while all of the family were living in NZ.
Traps with Section 99B
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• Look out for these potential traps:
• A taxpayer becomes a resident of Australia and then receives a distribution of capital from a NZ trust. If the amount is attributable to accumulated income, there is a section 99B risk.
• A resident of Australia receives a distribution of capital from a NZ trust following the death of a distant relative. In these cases, it is often hard work to prove whether (or the extent to which) the amount is attributable to amounts that would have been assessed in Australia if derived by an Australian resident. The taxpayer has the onus of proving that the amount is a corpus distribution that is excluded under section 99B(2)(a)
• ALWAYS make capital distributions before coming to Australia!
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Bequests to New Zealanders from Australian deceased estates
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• Normally inheritances on death are protected from CGT until either the deceased estate or the beneficiary disposes of the asset.
• This CGT “rollover” does not apply to gifts from a deceased estate to non-residents where the asset is not “taxable Australian property” (such as an interest in an overseas property or an interest in an overseas business)
• Instead, CGT will apply to treat the deceased as if they had sold the asset to the beneficiary at market value just before death, crystallising a capital gain in the deceased’s date of death tax return. The CGT liability that arises is met from the deceased estate prior to paying out to other beneficiaries
• To avoid this tax trap, individuals should consider bequeathing non-CGT assets (like cash) to non-resident beneficiaries and CGT assets to resident beneficiaries
