Technical article

Australia: I Leave and My Heirs Live Elsewhere. Does Australia Tax the Trust?

Capital gains tax is set aside on death for assets that pass to Australian residents.

By Neil Solomon · 3 min read

Imagine a woman in Australia who set up a trust in another country. Her two children now live in Canada and Spain. She is thinking about moving too. Her plain question is whether Australia still cares once she and the heirs are away.

The sources show three places where it may. Each one hangs on residence, so it helps to take them one at a time.

While the settlor is an Australian resident. Australian residents who put property into a non-resident trust, including by creating it, fall under what the tax office calls the transferor trust rules. The income and gains the trust earns can be counted as the transferor's own income. Say the trust earns AUD 100,000 a year (approximately US$65,000), as an example. That amount may land on the transferor's return, even if the money never comes home.

When a beneficiary lives abroad at year end. If a beneficiary is not an Australian resident at the end of the income year, the trustee pays tax on that beneficiary's share. The rates are non-resident marginal rates for an individual, and 45% where the beneficiary is itself a trustee. The beneficiary can claim credit for the tax paid. Dividends, interest and royalties follow the withholding rules, so they are not taxed twice.

When income stays in the trust. Income that no beneficiary is entitled to is taxed to the trustee at the top rate. The tax office's instructions give 45%. A practitioner source adds the 2% Medicare levy and gives 47%.

At death. Capital gains tax is set aside on death for assets that pass to Australian residents. It is triggered on the deceased's final return if the asset passes to a foreign resident and is not taxable Australian property in that person's hands. This applies to assets acquired on or after 20 September 1985. The heir takes over the original cost.

You might say: "I am leaving Australia, so none of this follows me." That may be so for some of it. The trust residence test is the part to read closely. The tax office's return notes list two conditions: no resident trustee, and control not exercised from Australia at any time in the year. Sources differ on whether both must be met together or either one is enough.

The heirs' side matters too. A child who becomes or stops being an Australian resident during the year may get a reduced tax-free threshold on the tax the trustee pays on their behalf. The full figure is AUD 18,200 (approximately US$12,000) for a resident.

You could write down a few facts before a move: where the trustee sits, where decisions are made, which year you stop being resident, where each heir lives on 30 June, and who holds each asset at death.

This touches the children most. It also touches the trustee, who files the return and pays on their behalf, and the papers that record who lived where and when.

If you have moved away from Australia with a trust still in place, what did you find you needed to write down first? Share it here. Someone weighing the same move may find it useful.

Figures are estimates for planning, based on public data. Date read: October 2026.