A beneficiary named in an Australian Will classed as ‘foreign person’ must apply to the Foreign Investment Review Board (FIRB) for approval before they can inherit certain assets.

FIRB reviews acquisitions by foreign persons and determines whether the acquisition will benefit Australia’s national interests and economy.

If you wish to leave part of your estate to foreign beneficiaries, you should consider the impact of the FIRB as part of your estate plan. The assets impacted include substantial interests in securities in an Australian entity and Australian land.

‘Foreign persons’ are generally defined as persons who are not ordinarily resident in Australia. This can include Australian citizens living overseas. Companies incorporated outside Australia or controlled by foreign trusts or foreign persons may also be affected.

Applying for FIRB Approval

Seeking FIRB approval is not generally one of the executor’s duties. However, once the legal interest has been transferred in accordance with the terms of the Will, foreign beneficiaries must apply to FIRB for approval. There are strict timeframes requiring an application to be made within 30 days of acquiring the interest. Non-compliance with the legislative requirements can attract significant civil and criminal penalties.

FIRB application fees are significant. For example, the fee (as at February 2025) for a property worth up to $1 million is $14,700, and the fee for a property worth between $1 to $2 million is $29,500. Unless the Will states otherwise, the beneficiary will usually be liable to pay the application fee. The beneficiary may also incur fees if they require a lawyer’s assistance to make the application.

FIRB approval is not guaranteed: each application is assessed on a case-by-case basis. FIRB will consider whether the acquisition is contrary to Australia’s national interest. The FIRB usually takes about 30 days to consider an application. If approval is not granted, conditions around ownership may be imposed or the asset may have to be sold.

Vacancy fees for unoccupied dwellings

In addition, a vacancy fee may be payable by foreign owners of residential property if their property is not occupied or available for rent for at least 183 days in a 12-month period.

Foreign owners of residential dwellings in Australia must lodge a yearly vacancy fee return. Any vacancy fee charged is generally the same as the application fee paid for the property, but some exemptions apply (e.g. if the dwelling is undergoing substantial renovations or is damaged).

Exemptions to FIRB approval

There are limited exemptions available where FIRB approval is not required even if a beneficiary is a non-resident, voiding the need to apply to FIRB. For instance, an exemption applies where an asset is acquired as a legal consequence of an involuntary act (such as where there is no Will and real estate is distributed according to the rules of intestacy).

Establishing a testamentary discretionary trust (TDT) in your Will may avoid the FIRB requirements; however, a TDT is only likely to be effective if none of the trust’s potential beneficiaries are foreign persons. Unless the TDT expressly prohibits foreign persons becoming beneficiaries of the TDT, the trustee will need to monitor the potential beneficiaries and notify FIRB should any of them become foreign persons at any stage while the TDT is being administered (which may continue for up to 80 years).

Other estate planning considerations

Other factors which may affect estates with foreign beneficiaries include:-

Capital gains events

In most circumstances, an asset passing from a deceased estate to a legal personal representative or beneficiary does not trigger a capital gains tax (CGT) liability. But if a beneficiary is a foreign resident, an asset passed to them would no longer be taxable Australian property. The estate must pay CGT on the asset.

However, there are conditions and exemptions around triggering a ‘CGT event K3’, so seek tax advice if you’re thinking of leaving an asset to a foreign resident.

Foreign death duties

If an asset is gifted to a beneficiary who is a foreign resident, Australian taxes aren’t the only consideration. Many countries have death duties and inheritance taxes that the beneficiary may have to pay.

Depending on the country, these taxes may be based on the value of the asset(s) inherited or the value of the estate, and can be particularly problematic if the asset in question can’t easily be liquidated (for instance, family property or an heirloom).

Additional taxes for trusts

In New South Wales, testamentary discretionary trusts with foreign residents as potential beneficiaries may be subject to foreign person surcharge purchaser duty (on the acquisition of residential land) and surcharge land tax (on the holding of residential land). Similar laws apply in Victoria and Tasmania.

Here to Help

The rules relating to estates involving non-resident beneficiaries are constantly changing. Executors should seek legal and tax advice as early as possible. The administration of deceased estates is an increasingly complex area. If your Will includes beneficiaries who currently live overseas or intend to do so in the future, contact us for estate planning advice to secure the best possible outcome for your estate and your beneficiaries.