Use the Lexology Navigator tool to compare the answers in this article with those from other jurisdictions.  

Recent developments

Have there been any notable recent developments in the provision of private client and offshore services in your jurisdiction, including any regulatory changes or case law?

The three most notable developments are as follows:

  •  The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was recently set up. This may result in increasing regulation of how these services are provided.
  • Significant changes to superannuation law were implemented on July 1 2017. In particular, these change the taxation of pensions.
  • Changes to certain capital gains tax concessions were implemented in 2017 with further changes expected in 2018.

Individual taxation

Residence and domicile

How is residence/domicile determined for tax liability purposes in your jurisdiction?

The four key tests that can determine whether individuals are residents for tax purposes are outlined in the table below:

Test

Information

The ‘resides’ test

This is the primary test for determining residency; it considers the living circumstances of the individual.

  • Does he or she intend to reside in Australia?
  • Is he or she permitted to reside in Australia (visas)?
  • Does he or she have an established financial presence (eg, bank accounts/employment/business)?
  • Does he or she have family living with him or her?
  • Does he or she own physical assets located in Australia?

An individual who fails this test may still be a resident if he or she passes one of the other tests.

The ‘domicile’ test

This test looks at whether Australia is the legal home of the individual. This is usually based on the location of the individual’s, or his or her parents’, place of birth.

The individual may be domiciled in Australia if he or she has the intention of living in Australia permanently.

The test also considers whether the individual has an established permanent home in another country. The indicators of a permanent home are the attributes of the ‘resides’ test.

The ‘183-day’ test

If an individual has been in Australia for a period of 183 days or more, he or she is considered to be a resident unless it can be shown that he or she has a home outside Australia where he or she usually resides. It is not necessary for the 183 days to be consecutive.

The ‘superannuation’ test

An individual will be considered an Australian resident if he or she is an employee of the Australian government and a member of a public service superannuation fund. The spouses and children of an Australian government employee will also be Australian residents.

Income

Describe the income tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).

  • The income tax regime in Australia is administered on a federal basis. For Australian residents, their worldwide income from all sources is considered taxable unless an exemption applies.
  •  The income tax reporting year commences on July 1 and ends on the following June 30. Tax returns are required to be lodged each year by October 31. If a registered tax agent is lodging the return on behalf of the individual, the due date can be delayed until up to May 15 of the following year – depending on the individual’s circumstances. An individual will not be required to file an income tax return if his or her income is below the lowest income threshold.
  •  For the financial year ending on June 30 2018, the individual tax rates for residents are as follows:

     

Taxable income

Tax payable

0 - $18,200

Nil

$18,201 - $37,000

0.19 for each $1 over $18,200

$37,000 - $87,000

$3,572 plus $0.325 for each $1 over $37,000

$87,000 - $180,000

$19,822 plus $0.37 for each $1 over $87,000

$180,001 and over

$54,232 plus $0.45 for each $1 over $180,000

  •  Non-residents will be taxed at a rate of $0.325 for each $1 for the first $87,000 of taxable income. Any taxable income over $87,000 will be taxed at the same rates as residents. Where an individual becomes a resident part way through the financial year, he or she will become entitled to a partial tax-free threshold.
  • In addition to the above marginal rates of tax, residents are required to pay an additional 2% of taxable income for the Medicare levy.
  • Individuals are entitled to claim tax deductions for expenses that have been reasonably incurred in relation to activities that earn assessable income.
  • While most income is considered assessable, there are some types of income that may be exempt from taxation; these include: proceeds from lotteries and competitions, gambling winnings, superannuation pension payments (subject to certain conditions) and compensation payouts for personal injuries.
  •  A number of tax offsets may be available to reduce a taxation liability. The most common offset is the franking credit tax offset, which will reduce taxation liability for any franking credits that were attached to dividend income received by the individual. Any credits that exceed the tax liability are refundable.

Capital gains

Describe the capital gains tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).

  • Capital gains are assessed as part of an individual’s assessable income and will be taxed at the individual marginal tax rates.
  • The most common trigger for capital gains tax is the sale or transfer of ownership of an asset. Other capital gain events include:
    • Creating contractual or other rights;
    • Granting an option; and
    • Creating a trust over an asset subject to capital gains tax.
  • There are no deductions available for capital gains; however, expenses incurred in the purchase or sale of the capital asset can form part of the asset’s cost base, which will decrease the capital gain amount. The expenses that can form part of the cost base include:
    • Transfer duty (also known as stamp duty);
    • professional fees (eg, lawyers, real estate agents, accountants);
    • advertising costs; and
    • borrowing expenses (loan application fees and mortgage discharge fees).
  • In terms of relief from capital gains tax, where an asset has been held for a continuous period of 12 months or more, the capital gain to be included in the individual’s tax return will be reduced by 50%. If the individual is conducting a business and the asset sold was used in the business, he or she may be eligible to make use of small business concessions, which can further reduce or negate the capital gain.
  • In Australia certain assets are exempt from triggering a capital gain, but are subject to limitations. The following assets are exempt from capital gains tax:
    • Residential real estate that was the individual’s principal place of residence (unless it was used to earn assessable income, in which case a partial exemption will apply);
    • Cars (motor vehicles that carry less than 1 tonne and fewer than nine passengers), motorcycles and similar;
    • Personal use assets that have a cost price of up to $10,000;
    • Collectibles that had a purchase price of $500 or less or were worth $500 or less when bought; and
    • Depreciable assets that were utilised as part of a business.

Inheritance and lifetime gifts

Describe the inheritance and gift tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).

  • While there are no specific estate or inheritance taxes imposed in Australia, some gifts from deceased estates may be included in the assessable income of the recipient.
  • Where the estate includes the balance of a superannuation account, the taxation of the superannuation amount will depend on whether the beneficiary is a dependent of the deceased.
  • Superannuation accounts consist of three components (tax-free component, taxed component and untaxed component), which are each taxed at different rates. It is necessary to determine the amount of each component within the superannuation account in order to calculate the tax payable. While the tax-free component will be tax free for both dependents and non-dependents, the taxed and untaxed components will be taxed differently based on the age of the deceased, the age of the beneficiary and whether the beneficiary is a dependent for tax purposes.
  • The taxation of gifts under the terms of a will depends on the nature of the asset gifted and the provisions of the will itself. Capital assets of the deceased gifted in specie to a beneficiary will generally be received by the beneficiary with the cost base of the asset held by the deceased. The asset will not be subject to capital gains tax until sold by the beneficiary. If the asset is sold by the legal personal representative of the deceased with only the proceeds being distributed to the beneficiary, the estate of the deceased will bear the capital gains tax obligation, if any, when the asset is sold. 
  • Gifts during lifetime are generally not taxable for the recipient, but depending on the asset being gifted there may be taxation consequences for the giver.
  • Where the asset being gifted is not exempt from capital gains tax, the gifting may be a deemed sale of the asset by giver and will trigger a capital gain. The asset will be considered to have been sold at the market price of the asset on the date that it was transferred. For the recipient, the cost base of the asset will be deemed to be the market value on the date of the transfer.

Real estate

What taxes apply to individuals’ acquisition and disposal of real estate in your jurisdiction?

  • For the acquisition of real estate, each state in Australia has its own regime that applies stamp duty (also known as transfer duty) on the transfer of land. For the most part, this duty will be payable by the purchaser of the real estate. Depending on the intended use of the real estate and the circumstances of the purchaser, this duty may be reduced or waived.
  • If the individual is not an Australian resident, most states will impose an increased amount of stamp duty.

If the individual is conducting a business of buying and selling or developing property, then the proceeds from the sale of real estate will be included as part of their regular income.

Non-real estate assets

Do any taxes apply to the acquisition and disposal of other assets apart from real estate?

  • Where assets are included in the acquisition or disposal of a business, they may be subject to the application of transfer duty depending on which state in Australia the acquisition or disposal takes place. Otherwise, the sale of an asset may be subject to capital gains tax.
  • Assets such as shares in private companies, shares in listed companies and units held in unit trusts may be subject to capital gains tax depending on their cost base, market value at sale and the availability of applicable concessions.
  • It is important to consider in particular whether capital gains tax or duty applies to the acquisition or disposal of almost any asset (including high-value collectible items) with the exception of personal property. Capital gains tax will apply on the same basis Australia-wide, but duty is specific to each state and territory.   

Other applicable tax regimes

Are any other direct or indirect tax regimes relevant to individuals?

  • Most purchases of goods and services in Australia will be subject to a goods and services tax (GST) of 10% of the taxable value. This tax is typically collected and reported by the seller or service provider; however, an individual may be required to pay GST on any goods that he or she has imported into Australia.
  • Where an individual operates a business personally, he or she will be required to register as a GST-reporting entity if his or her business has a turnover of $75,000 (gross income not including GST) or more, or if he or she is providing taxi or limousine services to the public.
  • If the individual is operating a business with employees and provides benefits to those employees besides wages or superannuation, if the value of the benefit is over $2,000 per employee over a period of one year (the reporting period commences April 1 and ends March 31), then the individual may be liable to pay fringe benefits tax.
  • Land tax is a tax levied in most states and territories (it is not a federal tax in Australia) on the ownership of land, particularly investment property and generally excluding an individual’s principal place of residence. Each state and territory has different thresholds and requirements in respect of how this tax will be levied.

Planning considerations

Are there any special tax planning considerations for individuals with a link to your jurisdiction?

  • An individual that is receiving significant taxable income may be able to reduce his or her taxable income by making concessional contributions to his or her superannuation account.
  • If the individual is earning income from employment, he or she could enter into a ‘salary sacrifice’ arrangement with his or her employer where a portion of the wages or salary is not paid to him or her, but is instead directly deposited into his or her superannuation account. This decreases the taxable income and the amount that is deposited into the superannuation account is taxed at the concessional rate of 15%.
  • If the individual is self-employed, he or she may be entitled to make concessional contributions to his or her own superannuation account, which can be used as deductions from his or her business income. In addition, where an individual makes a capital gain from the sale of a business-related asset, he or she can reduce the capital gain by applying some of the proceeds towards his or her superannuation account.
  • There are multiple tax planning options available to individuals by the use of discretionary trust and private company structures. 

Trusts, foundations and charities

Trusts

Are trusts legally recognised in your jurisdiction? If so, what types are available and most commonly used?

  • Trustees of trust entities are recognised as legal entities in Australia. While trusts themselves are recognised as a relationship rather than a legal entity, they are treated as taxpayers for the purposes of tax administration.
  • The main division in the types of trust is in the method of determining the entitlement of beneficiaries. Trusts can be either discretionary or fixed. In discretionary trusts, the distribution of the trusts income or capital to beneficiaries is at the discretion of the trustee. For fixed trusts, the distribution of income and capital to beneficiaries is predetermined by the trust deed.
  • Fixed trusts can have the entitlements of beneficiaries determined by units that are issued by the trust, in which case the trust is referred to as a unit trust.
  • Discretionary trusts are the most common type of trust as they can be adapted to serve a number of different purposes.
  • One of the common forms of discretionary trust is generally known as a family trust, which has the purpose of providing protection for the assets of a family group and allowing for the sharing of income. The trustee of a family trust can make an election to the Australian Taxation Office and if the trust passes the family trust tests, then it will be eligible to access a number of tax concessions.

What rules and procedures govern the establishment and maintenance of trusts?

  • In Australia each state has its own legislation that governs the establishment and maintenance of trusts.
  • All Australian states with the exception of South Australia have a restriction on the period that a trust may exist. This restriction prevents a trust from existing for over 80 years.

How are trusts taxed in your jurisdiction?

Where a trust has distributed all of the income that it has earned during the taxation year to eligible beneficiaries, then the income will be taxed in the tax returns of beneficiaries. If there is income that has not been distributed or has been distributed to a beneficiary that is ineligible, the trustee of the trust will be assessed on the income at the highest marginal rate for individuals ($0.47 per $1).

If trust income has been distributed to a minor, a person under a legal disability or a non-resident, then the trustee of the trust will be obligated to pay tax on behalf of the beneficiary.

Foundations and charities

Are foundations and charities legally recognised in your jurisdiction? If so, what forms can they take?

  • Foundations and charities are legally recognised in Australia. They may be formed using a number of different entities such as trusts, corporations and incorporated on non-incorporated associations.
  • In order for an organisation to be recognised as a charity it must be:
    • not for profit;
    • for a charitable purpose; and
    • for the public benefit (where the charitable purpose is not for the relief of poverty).
  • The charitable purpose must meet one of the definitions of ‘charitable purpose’ stated in the Charities Act 2013 (Cth), which include:
    • the purpose of advancing health;
    • the purpose of advancing education;
    • the purpose of advancing culture; and
    • the purpose of advancing the security or safety of Australia or the Australian public.

What rules and procedures govern the establishment and maintenance of foundations and charities?

Depending on the type of entity that is used to run the charity, different rules or legislation will govern how the entity is operated, and the duties and obligations of the person that runs the entity. Trusts will be governed by legislation based in the state in which it was established and corporations will be subject to the federal Corporations Act 2001.

The activities and function of the charity will be governed by the federal Charities Act 2013. They may also be subject to additional legislation or regulations depending on the state in which the charity or foundation was established or operates.

How are foundations and charities taxed?

  • Charities will be taxed based on how the underlying entity running the charity is taxed. In order for the charity to be given taxation concessions, it is required to be registered with the Australian Charities and Not for Profits Commission (ACNC). 
  • Upon registration, the ACNC will send the charity’s application for taxation concessions to the Australian Taxation Office, which will determine the concessions for which the charity will be eligible. The taxation concessions that may apply to a charity are:
    • income tax exemptions and franking credit refunds – the charity will be exempt from paying income tax and may be eligible to receive refunds of franking credits on dividend income that it receives;
    • goods and services tax concession; and
    • fringe benefits tax rebates.
  • The charity or foundation may also apply to become a deductible gift recipient; this allows the donations made to the charity to be used as a tax deduction in the income tax return of the donator.

Compliance issues

Anti-avoidance and anti-abuse provisions

What anti-avoidance and anti-abuse tax provisions apply in the context of private client wealth management?

  • A number of anti-avoidance provisions are included in Part IV A of the Income Tax Assessment Act 1936 (Cth). Some deal with specific taxation arrangements, but there is also a general provision that will apply to any activity that the commissioner of taxation considers to be a scheme that has the predominant purpose of gaining a tax benefit. The definition of ‘scheme’ is very broad and allows a wide range of activities to be potentially caught. In determining whether a scheme exists, the commissioner will examine whether the activity:
    • was undertaken for a commercial purpose; and
    • would have been undertaken had a tax benefit not been available.
  • The Australian Taxation Office is particularly interested in investment schemes that seek to provide a return through the complex manipulation of tax laws to reduce tax liabilities.
  • In addition to the anti-avoidance provisions, the commissioner of taxation has the power to amend income tax assessments where it is suspected that fraud or evasion has occurred. The commissioner is not subject to a time limit to make amended assessments in relation to issues of fraud or evasion.

Anti-money laundering provisions

What anti-money laundering provisions apply in the context of private client wealth management (eg, beneficial ownership registers)?

  • In Australia, money laundering is controlled and monitored under the Anti-money Laundering and Counter Terrorism Financing Act 2006 (Cth) (AML/CTF Act).
  • An entity that provides services designated in Section 6 of the AML/CTF Act is required to report any transaction (physical or electronic) that involves transferring $10,000 or over to Autralia’s Transaction Reports and Analysis Centre (known as AUSTRAC) within 10 days of the transaction occurring.

Wills and probate

Succession rules

What rules and restrictions (if any) govern the disposition of and succession to an individual’s property and assets in your jurisdiction?

  • Each state in Australia has its own legislation regarding succession and wills, and it is this legislation that determines the procedure for the executor or administrator of the deceased’s estate to pay the debts of the estate. The legislation will usually provide guidelines as to the order in which assets of the estate are to be used for the payment of debts. They may also provide rules for the remuneration of the executor.
  • The tax payable by the deceased is governed by the federal Australian taxation legislation. The executor or administrator will be required to have a final individual tax return prepared for the deceased for the period up to the date of his or her death.
  • While the estate is being administered, it may still be receiving income from its assets. As the deceased’s estate is considered a trust for taxation purposes, this income may be distributed to the beneficiaries of the estate. However, if the beneficiaries are not entitled to the estate’s income, any tax on the income will be payable by the trustee (usually the executor or administrator) of the deceased estate. The tax payable by the trustee will be assessed at the individual marginal tax rates without the Medicare levy. These tax rates will be applicable for a period of three tax years after the date of death (the first tax year commences on the date of death and ends on June 30 of that year). If the administration of the estate has not been completed before the end of the third tax year, the following tax rates will apply:

Taxable income to which beneficiaries are not entitled

Tax payable

0 - $416

Nil

$417 - $670

50% of the excess over $416

$671 - $37,000

Where the taxable income of the estate exceeds $670, the whole of the income will be taxed at 19% from $0

$37,001 - $80,000

$7,030 plus 32.5% of the excess over $37,000

$80,001 - $180,000

$21,005 plus 37% of the excess over $80,000

$180,001 and over

$58,005 plus 47% of the excess over $180,000

Intestacy

What rules and procedures govern intestacy?

Types of intestacy

In Australia, an intestacy may arise:

  • where the deceased dies without leaving a valid will; and
  • where the deceased leaves a valid will, but not all of the deceased’s estate is disposed of under the will.

Statutory rules

Where there is an intestacy, the statutory rules in each Australian jurisdiction govern distribution of the deceased’s estate.

The legislation creates several categories of potential recipient. 

The descending priority for recipients is as follows:

  • surviving spouse and issue of the deceased (‘issue’ is defined as the nearest lineal descent of the deceased). In this category, the extent of the estate passing to the surviving spouse depends on whether or not there is also surviving issue of the deceased;
  • immediate family;
  • next of kin; and
  • the Crown.

Additionally, the legislation also provides differing rules for distribution depending on the various classes of asset making up the estate. These categories include:

  • personal or household chattels of the deceased;
  • the matrimonial home of the deceased; and
  • the remainder of the estate.

The relevant provisions in the statutory rules for each Australian jurisdiction are:

Australian jurisdiction

Legislation

Queensland

Part 3 and Schedule 2 of the Succession Act 1981

New South Wales

Chapter 4 of the Succession Act 2006

Victoria

Part 1A of the Administration and Probate Act 1958

South Australia

Part 3A of the Administration and Probate Act 1919

Australian Capital Territory

Part 3A of the Administration and Probate Act 1929

Northern Territory

Part 3, Divisions 4, 4A and 5 of the Administration and Probate Act 1969

Western Australia

Part 2 of the Administration Act 1903

Tasmania

Intestacy Act 2010

Governing law

What rules and restrictions (if any) apply to the governing law of a will?

The rules and restrictions that apply to the governing law of a will are subject to legislation in each state and territory of Australia. The relevant primary legislation that contain the statutory rules for each Australian jurisdiction are:

Australian jurisdiction

Legislation

Queensland

Succession Act 1981

New South Wales

Succession Act 2006

Victoria

Wills Act 1997

South Australia

Wills Act 1936

Australian Capital Territory

Wills Act 1968

Northern Territory

Wills Act 2000

Western Australia

Wills Act 1970

Tasmania

Wills Act 2008

Case law sometimes also clarifies the rules and restrictions set out in the relevant legislation.

Formalities

What are the formal and procedural requirements to make a will? Are wills and other estate documents publicly available?

Any document that meets the formal requirements of a will is admissible to probate, providing that the testator possessed the requisite capacity and intention to make a will.

Each Australian jurisdiction contains statutory provisions that set out the specific formal requirements of wills. While there are some minor points of difference between the acts, the fundamental requirements are that:

  • the will be in writing;
  • the will be signed by the testator (or someone else in the presence of and at the direction of the testator);
  • the signature be made with the intention of executing the will;
  • the will be signed in the presence of two or more witnesses who are present at the same time; and
  • each witness attest and sign the will in the presence of the testator.

Australian jurisdiction

Legislation

Queensland

Section 10 of the Succession Act 1981

New South Wales

Section 6 of the Succession Act  2006

Victoria

Section 7 of Wills Act 1997

South Australia

Section 8 of the Wills Act 1936

Australian Capital Territory

Sections 9-10 of the Wills Act 1968

Northern Territory

Section 8 of the Wills Act 2000

Western Australia

Section 8 of the Wills Act 1970

Tasmania

Section 8 of the Wills Act 2008

Judicial dispensing power

If a will does not comply with the formal requirements, it may still be admitted to probate as a will if the court is sufficiently satisfied that:

  • the deceased intended that document to constitute his or her will; and
  • the document expresses the deceased’s testamentary intention.

Australian jurisdiction

Legislation

Queensland

Section 18 of the Succession Act 1981

New South Wales

Section 8 of the Succession Act 1997

Victoria

Section 9 of the Wills Act 1997

South Australia

Section 12 of the Wills Act 1936

Australian Capital Territory

Section 11A of the Wills Act 1968

Northern Territory

Section 10 of the Wills Act 2000

Western Australia

Sections 9 and 32 of the Wills Act 1970

Tasmania

Section 10 of the Wills Act 2008

 

Once a will is filed with a court, it becomes a public document. Upon the payment of a specific fee, a person can view a will on the court’s file. To determine whether probate has been applied for, a person can also search the civil files of the relevant court.

Validity and amendment

How can the validity of a will be challenged? Can the will be amended after the decedent’s death?

Where an application for grant of probate is not contested, the registrar of court may grant probate without the need to prove the will in court formally if an application is supported by affidavits.

By contrast, where the validity of the will is disputed, an application for a grant in solemn form can be made and the proceedings are heard by the court. Once the matter is heard, a grant in solemn is granted that effectively has the status of a court judgment and is binding on the parties.

Statutory rectification powers

The courts have limited power to rectify or amend any defect in a will after the testator’s death. 

The Supreme Court may amend a will only if it is satisfied that the will does not carry out the testator’s intentions. The court’s power to amend is expressed generally in the South Australian and Australian Capital Territory legislation, while the remaining Australian provisions have a much more limited power, requiring that:

  • a clerical error were made; or
  • the will give no effect to the testator’s instructions.

Australian Jurisdiction

Legislation

Queensland

Section 33 of the Succession Act 1981

New South Wales

Section 27 of the Succession Act 2006

Victoria

Section 31 of the Wills Act 1997

South Australia

Section 25AA of the Wills Act 1936

Australian Capital Territory

Section 12A of the Wills Act 1968

Northern Territory

Section 27 of the Wills Act 2000

Western Australia

Section 50 of the Wills Act 1970

Tasmania

Section 42 of the Wills Act 2008

How is the validity of a will established in your jurisdiction?

Broadly, a valid will exists in circumstances where:

  • the testator possessed the required testamentary capacity;
  • the testator knew and approved of the contents of the will;
  • the testator intended to execute a will; and
  • the formal requirements are met.

Where a will disposes of property, it is admissible to a grant of probate by the court. The court’s grant of probate is conclusive evidence of the validity of a will:

Australian jurisdiction

Legislation

Queensland

Section 64 of the Evidence Act 1977

New South Wales

Section 92 of the Evidence Act 1995

Victoria

Section 92 of the Evidence Act 2008

South Australia

Section 119 of the Administration and Probate Act 1919

Australian Capital Territory

Section 9C of the Administration and Probate Act 1929

Western Australia

Section 140 of the Administration Act 1903

Tasmania

Section 92 of the Evidence Act 2008

To what extent are foreign wills recognised? Do any special rules and procedures apply to establishing their validity in your jurisdiction?

A foreign will may be recognised as an ‘international will’ under the Convention Providing a Uniform Law on the Form of an International Will 1973. International wills are recognised as valid in all countries that are party to the convention. The convention entered into force in Australia on March 10 2015.

Additionally, each Australian jurisdiction contains statutory provisions that are concerned with recognising the formal validity of wills. 

Australian jurisdiction

Legislation

Queensland

Sections 33T to 33YE of the Succession Act 1981

New South Wales

Sections 47 to 50E of the Succession Act 2006

Victoria

Sections 16A to 19E of the Wills Act 1997

South Australia

Section 25A to 25J of the Wills Act 1936

Australian Capital Territory

Part 2A and Part 3B of the Wills Act 1968

Western Australia

Part XA of the Wills Act 1970

Tasmania

Sections 59A to 62E of the Wills Act 2008

Estate administration

What rules and procedures govern:

(a) The appointment of estate administrators?

An administrator (the legal personal representative) is appointed by the court in situations where:

  • the deceased does not have a valid will;
  • the deceased has left a will, but has not appointed an executor; or
  • the deceased has made a will and has appointed an executor, but the executor is unwilling or unable (due to physical or mental disability or death) to carry out the duties of an executor.

The courts have a broad power in appointing an administrator who is deemed to be adequate to assume the responsibilities of the role.

Australian jurisdiction

Legislation

Queensland

Section 6 of the Succession Act 1981

New South Wales

Section 74 of the Probate and Administration Act 1898

Victoria

Section 17 of the Supreme Court Act 1986

South Australia

Section 5 of the Administration and Probate Act 1919

Australian Capital Territory

Sections 12 of the Administration and Probate Act 1929

Northern Territory

Sections 14 and 33 of the Administration and Probate Act 1969

Western Australia

Section 6 and 36 of the Administration Act 1903

Tasmania

Section 13 of the Administration and Probate Act 1935

In situations where the deceased dies intestate, the court will likely grant administration to the person with the greatest interest in the estate. There is an order of priority, which means that should these circumstances arise, the courts will generally look to the next of kin or an individual who shared an intimate relationship with the deceased to be prioritised as administrator. 

Australian jurisdiction

Legislation

Queensland

Rule 610 of the Uniform Civil Procedure Rules 1999

New South Wales

Section 63 of the Probate and Administration Act 1898

South Australia

Rule 31 of the Supreme Court Probate Rules 2004

Australian Capital Territory

Section 12 of the Administration and Probate Act 1929

Northern Territory

Section 22 of the Administration and Probate Act 1969

Western Australia

Sections 24 and 25 of the Administration Act 1903

Tasmania

Rule 19 of the Probate Rules 2017

(b) Consolidation and administration of the estate?

The chronological procedure for the personal representative is as follows:

  • Ensure that the relevant person is in fact deceased before taking any steps in relation to his or her estate;
  • Ensure that all assets of the deceased that require continuous and immediate supervision are attended to;
  • Attend to the burial of the deceased;
  • Apply for probate (“proving the will”);
  • Collect the deceased’s assets (this may include transferring title to real property, physically moving assets or retrieving monies lent on personal securities);
  • Identify and meet the liabilities of the deceased; and
  • Distribute the assets of the deceased within a “reasonable time”. The following jurisdictions impose a statutory timeframe:

Australian jurisdiction

Legislation

Victoria

Section 49 of the Administration and Probate Act 1958

South Australia

Section 56 of the Administration and Probate Act 1919

Western Australia

Section 44 of the Administration Act 1903

Tasmania

Section 43 of the Administration and Probate Act 1935

(c) Distribution of the estate to heirs?

The primary function of a personal representative is to collect the estate of the deceased (real and personal) and to administer the estate according to law. 

In distributing the estate under a will, the personal representative must be careful to ensure that the estate is distributed in accordance with the proper interpretation of the will. 

Additionally, there are detailed statutory rules for each Australian jurisdiction that govern the administration of assets from the deceased’s estate, which are as follows:

Australian jurisdiction

Legislation

Queensland

Part 5 of the Succession Act 1981

New South Wales

Part 2, Division 2 of the Probate and Administration Act 1898

Victoria

Part 1, Division 2 of the Administration and Probate Act 1958

South Australia

Part 3 of the Administration and Probate Act 1919

Australian Capital Territory

Section 41C and Schedule 4 of the Administration and Probate Act 1929

Northern Territory

Part III, Division 6 of the Administration and Probate Act 1969

Western Australia

Part 2 of the Administration Act 1903

Tasmania

Part IV of the Administration and Probate Act 1935

(d) Settlement of the decedent’s debts and payment of any taxes and fees?

Generally, the liability of payment of debt of the deceased will depend upon whether the estate of the deceased is solvent or insolvent. Each state and territory has different requirements when dealing with debt and appropriate advice should be sought in respect of the requirements in each state and territory.

Planning considerations

Are there any special considerations specific to your jurisdiction that individuals should bear in mind during succession planning?

Family provision applications – reason to move money out of the estate

All Australian succession legislation provides that where the testator does not make adequate provision for the proper maintenance and support of certain dependants, then the court may (at its discretion) make an order for further provision out of the estate. The family provision legislation applies to testate, as well as intestate estates.

The applicant must fall within one of the statutory prescribed categories of applicant. The amount of the order depends on the circumstances of each individual case.

Australian jurisdiction

Legislation

Queensland

Part 4 of the Succession Act 1981

New South Wales

Chapter 3 of the Succession Act 2006

Victoria

Part 4 of the Administration and Probate Act 1958

South Australia

Inheritance (Family Provision) Act 1972

Australian Capital Territory

Family Provision Act 1969

Northern Territory

Family Provision Act 1970

Western Australia

Family Provision Act 1972

Tasmania

Testator’s Family Maintenance Act 1912

When estate planning, moving certain property out of a testator’s estate may prove useful if the testator foresees that it is possible to bring a family provision application. The establishment of inter vivos trusts are useful.

To ensure that monies are given to a particular person (eg, a spouse), opening up a joint bank account may take that property out of the estate, and help the intended person gaining access to it.

Co-ownership of property

In Australia, the rule of survivorship provides that where property is held between two or more people as joint tenants, the interest of the deceased person passes directly to any surviving joint tenant or joint tenants. This is the case regardless of what is stated in the individual’s will.  

By contrast, where property is held as tenants in common, on the death of one of the owners, that person’s share passes to his or her estate and is distributed according to the will. 

Life insurance and superannuation

Additionally, the implications of life insurance and relevant superannuation schemes should be considered when estate planning.

Capacity and power of attorney

Loss of capacity

What rules, restrictions and procedures govern the management of an individual’s affairs where he or she loses capacity and the grant of power of attorney in such cases?

Loss of testamentary capacity

Even if the testator has drafted a will, it will not be admitted into probate unless the testator had sufficient mental capacity to make the will. The test is that the testator must have “sound mind, memory and understanding” (Banks v Goodfellow (1870) LR 5 QB 549).

A will made where a testator lacked capacity is void and of no effect.

Most Australian jurisdictions now provide the state or territory’s Supreme Court with the power to make wills for persons who lack the necessary testamentary capacity to do so themselves.

Australian jurisdiction

Legislation

Queensland

Sections 21 to 28 and 33Y of the Succession Act 1981

New South Wales

Sections 18 to 26 of the Succession Act 2006

Victoria

Sections 21 to 30 of the Wills Act 1997

South Australia

Section 7 of the Wills Act 1936

Australian Capital Territory

Sections 16A to 16I Wills Act 1968

Northern Territory

Sections 19 to 26 of the Wills Act 2000

Western Australia

Part XI of the Wills Act 1970

Tasmania

Sections 21 to 28 of the Wills Act 2008

All Australian jurisdictions (save Western Australia) have adopted a two-stage approach:

  • Stage 1 – application for leave: The purpose of this first stage is to screen out unmeritorious applications. The court must be satisfied that the statutory threshold requirements are met before leave is granted (except in Western Australia and South Australia where these requirements must be considered in the substantive application). 
  • Stage 2 – substantive application: On hearing the substantive application, the statutory requirements, as outlined in the above provisions, must be examined by the court.

Although there is some variation in language between the jurisdictions, there are three main requirements that must be met before the court exercises its power:

  • The person for whom the application is made does not have testamentary capacity;
  • The proposed will, alteration or revocation would have been made by the testator if he or she had testamentary capacity; and
  • It is appropriate for the order to be made.

The lead Australian authority in this area is Re Fenwick; Application of J R Fenwick & Re Charles (2009) 76 NSWLR 22.

As a practical note, to limit costs and where all the evidence to be put forward to the court is available, the leave and the substantive application can be heard together. 

Power of attorney

In each Australian jurisdiction, a person can also grant a power of attorney to a trusted individual. The principal must have capacity at the time of the appointment.

An ‘enduring power of attorney’ is a legal document that allows a person to appoint a person of his or her choice to manage assets and financial affairs should that person become unable to do so due to illness, an accident or absence. An attorney may make decisions relating to property, business and financial matters as permitted by the enduring power of attorney.

This can be compared with a ‘medical power of attorney’, which permits a person to make decisions of a medical nature (including medical treatment). 

Australian jurisdiction

Legislation

Queensland

Powers of Attorney Act 1998

New South Wales

Powers of Attorney Act 2003

Victoria

Powers of Attorney Act 2014

South Australia

Powers of Attorney and Agency Act 1984

Australian Capital Territory

Powers of Attorney Act 2006

Northern Territory

Powers of Attorney Act 1980

Western Australia

Guardianship and Administration Act 1990

Tasmania

Powers of Attorney Act 2000

Guardianship

Where a person lacks capacity, a guardianship regime exists in Australian jurisdictions:

 Australian jurisdiction

Legislation

Queensland

Guardianship and Administration Act 2000

New South Wales

Guardianship Act 1987

Victoria

Guardianship and Administration Act 1986

South Australia

Guardianship and Administration Act 1993

Australian Capital Territory

Guardianship and Management of Property Act 1991

Northern Territory

Guardianship of Adults Act 2016

Western Australia

Guardianship and Administration Act 1990

Tasmania

Guardianship and Administration Act 1995

Minors

What rules, restrictions and procedures govern the holding and management of a minor’s assets until the minor reaches the age of capacity?

Restrictions for minors to benefit under a will

If the beneficiary is a minor, his or her entitlement may be withheld under the will until he or she attains majority.

Restrictions for minors in drafting a valid will to distribute his or her own assets

As a general rule, the minimum age for making a will in all Australian jurisdictions is 18 years:

Australian jurisdiction

Legislation

Queensland

Section 9 of the Succession Act 1981

New South Wales

Section 5 of the Succession Act 2006

Victoria

Section 5 of Wills Act 1997

South Australia

Section 5 of the Wills Act 1936

Australian Capital Territory

Section 8 of the Wills Act 1968

Northern Territory

Section 7 of the Wills Act 2000

Western Australia

Section 7 of the Wills Act 1970

Tasmania

Section 7 of the Wills Act 2008

There are, however, some exceptions to this general rule. Firstly, in all jurisdictions (bar Western Australia) a married person may make a valid will, even if that person is below the age of 18 years.

Secondly, in some jurisdictions, the Supreme Court may make an order declaring that a minor may make, alter or revoke a valid will.

Each of the statutory provisions require the court to be satisfied of certain matters before an order can be made, such as that the order is reasonable in all the circumstances of the case, the minor understands the nature and effect of the proposed will, and the proposed will accurately reflects the intention of the minor.

The relevant Australian jurisdictions and provisions outlining the court’s jurisdiction are as follows:

Australian jurisdiction

Legislation

Queensland

Section 19 of the Succession Act 1981

New South Wales

Section 16 of the Succession Act 2006

Victoria

Section 20 of Wills Act 1997

South Australia

Section 6 of the Wills Act 1936

Australian Capital Territory

Sections 8A and 8B of the Wills Act 1968

Northern Territory

Section 18 of the Wills Act 2000

Tasmania

Section 20 of the Wills Act 2008

Family links

Marriage and civil partnerships

What matrimonial property regimes are recognised in your jurisdiction?

Australia does not have a recognised matrimonial property regime as such. 

However, for the purposes of matrimonial breakdown the Family Law Act 1975 (Cth) is the main piece of legislation that deals with the division of property in the event of separation and divorce.

Financial protection, in succession law, is afforded to spouses and partners by way of the intestacy rules and family provision applications.

Are same-sex marriages and/or civil partnerships recognised in your jurisdiction?

As of December 9 2017, same-sex marriages are recognised in all Australian jurisdictions. The Marriage Act 1961 (Cth) now defines ‘marriage’ in a gender-neutral way: “marriage means the union of 2 people to the exclusion of all others”.

Same-sex couples are recognised as a testator’s ‘spouse’ for the purposes of succession legislation and estate planning.

Recognition of same-sex de facto partners

In addition to the above, Australia also recognises same-sex de facto partners in succession law.

In all jurisdictions, de facto partners are recognised for the purposes of the intestacy provisions and the family provision applications.

Children

Is there a legal distinction between legitimate and illegitimate children in terms of estate and succession planning?

The effect of the Australian status of children legislation is that there is now no distinction between legitimate and illegitimate children for the purpose of estate and succession planning; a child is to be regarded as a child of his or her natural parents whether or not the parents are married.

Illegitimate children will fall under the definition of ‘issue’ for the purpose of intestacy provisions, and are able to make a claim for provision under the family provision regime.

Australian jurisdiction

Legislation

Queensland

Status of Children Act 1978

New South Wales

Status of Children Act 1996

Victoria

Status of Children Act 1974

South Australia

Family Relationships Act 1975

Australian Capital Territory

Parentage Act 2004 and Section 31A of the Wills Act 1968 (in relation to wills)

Northern Territory

Status of Children Act 1979

Western Australia

Administration Act 1903

Tasmania

Status of Children Act 1974

Is there a legal distinction between natural and adopted children in terms of estate and succession planning?

Effect of disposition of property

For the purposes of devolution of property either by will or by a disposition inter vivos, the effect of the adoption legislation is that:

  • the adopted child is to be treated as the child of adoptive parents; and
  • the adoptive parents are to be treated the same as the natural parents. 

Australian jurisdiction

Provision

Queensland

Section 216 of the Adoption Act 2009

New South Wales

Section 98 of the Adoption Act 2000

Victoria

Section 54 of the Adoption Act 1984

South Australia

Section 9 of the Adoption Act 1988

Australian Capital Territory

Section 44 of the Adoption Act 1993

Northern Territory

Section 46 of the Adoption of Children Act 1994

Western Australia

Section 75 of the Adoption Act 1994

Tasmania

Section 51 of the Adoption Act 1988

Family provision applications

Adopted children are eligible applicants pursuant to the Australian adoption legislation.

Intestacy

On the intestacy of the adoptive parent, the adopted child will be considered to be the child of the adoptive parent and will receive property in accordance with the relevant scheme of distribution.

The Australian adoptive legislation makes the adoptive parents the legal parents of the child to the exclusion of any relationship between the child and his or her natural parents. On that basis, it is important to note that the adopted child cannot take on intestacy from the estate of his or her natural parents.

Practical drafting note

When drafting, it is still necessary to take care in defining who the members of a particular class are. These definitions will depend on the individual client and the circumstances of the case. 

For example, there may be persons who are legally classified as children, however, the testator may not wish to provide for that person under his or her will.