When an executor sells Australian property from a deceased estate and probate drags across two financial years, the capital gains tax event is reported in the year the contract of sale was signed, not the year settlement occurred and not the year probate was finally granted. This single rule trips up more executors than any other part of the process, because most people assume the tax year follows the money, when in fact it follows the paperwork. Get the year wrong and the estate risks lodging in the wrong return, misapplying withholding tax, or missing lodgement deadlines entirely. ODIN Tax works with Australian expats and non-resident beneficiaries who inherit or administer Australian property from overseas, and this exact timing question, contract date versus settlement date versus grant of probate, comes up in a large share of estate-related enquiries.
TL;DR
- The CGT event date is always the contract signing date, regardless of when probate is granted or settlement occurs.
- A non-resident executor can cause the entire estate to be taxed as a non-resident trust, even if the deceased was an Australian resident.
- Foreign Resident Capital Gains Tax Withholding (FRCGW) of 15% applies with no minimum threshold as of 1 January 2025, and can catch estates by surprise at settlement.
- Probate delays that push settlement into a new financial year do not change which year the gain is reported in.
- Backlog or late lodgement for an estate is common and manageable; penalties are frequently remitted where there’s a reasonable explanation.
ODIN Tax is a Registered Australian Tax Agent that prepares Australian tax returns and resolves overdue lodgements for Australian expats and non-residents, including executors and beneficiaries managing property sales from deceased estates while living overseas.
What determines which financial year a deceased estate’s property sale is reported in?
The reporting year for a deceased estate’s property sale is fixed by the date the contract of sale is signed, not the date of settlement. This is the same rule that applies to any CGT event involving real property, and it does not bend for deceased estates. If contracts are exchanged in June but settlement doesn’t occur until August, the CGT event belongs to the financial year in which contracts were exchanged, even though the estate hasn’t received the sale proceeds yet.
This creates a specific problem for executors dealing with probate delays. Probate can take months, sometimes over a year, particularly where there are overseas beneficiaries, missing documentation, or disputes among family members. If the executor signs a contract of sale before probate is finalised (which is possible in some circumstances, subject to conditions), or if the sale process itself stretches from one financial year into the next, the tax treatment still locks to the contract date. Executors who assume the “sale year” is whichever year the money landed in the estate account often lodge in the wrong year, which can trigger amendment requests or penalty exposure further down the line.
Why does a non-resident executor change the tax treatment of the whole estate?
A non-resident executor does not just affect their own personal tax position, they can change how the entire estate is taxed. Where the sole executor of a deceased estate is a non-resident, the estate itself is treated as a non-resident trust for tax purposes, irrespective of where the deceased person lived or whether the deceased was an Australian tax resident at time of death. This is one of the more counterintuitive rules in Australian estate tax, and it catches out families where an adult child living in Hong Kong, Singapore or London is appointed executor simply because they’re the most organised or the most trusted, without anyone considering the tax consequence of that appointment.
The practical effect is significant. A non-resident estate loses access to the tax-free threshold that would otherwise apply to a resident deceased estate, and income and gains that would have been taxed concessionally as a resident trust are instead taxed as non-resident income. An estate’s tax residency status flows from who holds the reins, not from where the underlying assets sit or where the deceased spent their life. If the only person legally empowered to make decisions for the estate lives outside Australia, the ATO treats the whole trust that way.
This is why estate planning specialists increasingly recommend appointing at least one Australian resident co-executor where family members live overseas. It’s not a legal formality, it’s a tax structuring decision with real financial consequences.
How does Foreign Resident Capital Gains Tax Withholding apply to a deceased estate?
Foreign Resident Capital Gains Tax Withholding (FRCGW) is a withholding mechanism that applies at settlement whenever the vendor is a foreign resident, and as of 1 January 2025 it sits at 15% with no minimum threshold, applying to residential and commercial property, vacant land, buildings, and certain indirect property interests. For a deceased estate, this withholding applies based on the residency status of the vendor, which in this context is the estate itself, not the deceased person and not necessarily the beneficiaries.
If the estate is classified as a non-resident trust because of a non-resident executor, the purchaser is generally required to withhold 15% of the sale price at settlement and remit it to the ATO, unless the estate can obtain a clearance certificate or variation notice. Because clearance certificates are typically only available to Australian tax residents, a non-resident executor may find the estate simply cannot get one, meaning the withholding applies automatically regardless of what the estate’s actual final CGT liability turns out to be. This can create a cash flow problem for the estate: 15% of the gross sale price is withheld upfront, and the estate has to wait until its tax return is assessed to recover any excess over the actual tax owed.
| Scenario | Executor Residency | Estate Tax Treatment | FRCGW Outcome |
|---|---|---|---|
| Deceased was Australian resident, sole executor is Australian resident | Resident | Resident trust, tax-free threshold available | Clearance certificate generally available; no withholding |
| Deceased was Australian resident, sole executor lives overseas | Non-resident | Non-resident trust, no tax-free threshold | Clearance certificate typically unavailable; 15% withheld at settlement |
| Deceased was a foreign resident, executor lives overseas | Non-resident | Non-resident trust regardless of deceased’s history | 15% withheld at settlement |
What happens when probate itself spans two financial years?
Building on the contract-date rule above, the harder question is what happens when probate hasn’t even been granted by the time the financial year rolls over. Probate delays are common, particularly for estates with overseas beneficiaries, assets in multiple jurisdictions, or executors who are themselves living abroad and face practical hurdles gathering documentation. None of this changes the CGT timing rule. The estate’s obligation to report the gain still crystallises on the contract signing date.
What probate timing does affect is the estate’s ability to actually sign a valid contract in the first place. Depending on the state and the terms of the will, an executor may need the grant of probate before they can transact on the property, which naturally pushes the contract date (and therefore the tax year) later. Executors managing this from overseas should treat probate progress and settlement planning as two separate workstreams: one is a legal process governed by state succession law, the other is a tax timing question governed by ATO rules on CGT events. Conflating the two is where many executors go wrong, assuming that because probate finished in one year, the tax outcome must land in that same year.
Why does income and gains earned before Australian residency began matter for overseas beneficiaries?
A separate but related trap applies specifically to foreign beneficiaries or a foreign deceased. Income and gains that were generated outside the Australian tax net before the relevant connection to Australia existed are sometimes wrongly assumed to fall outside Australian tax altogether, when in fact the ATO’s treatment depends on the specific character of the asset and the residency status of the trust at the time of the CGT event. This is a technical area, and outcomes vary based on the estate’s structure, so executors dealing with a foreign deceased or overseas beneficiaries should get the specific position confirmed rather than assuming a blanket exemption applies.
Overseas beneficiaries inheriting Australian property should also understand that Australia does not have a separate estate tax or inheritance tax, but capital gains tax still applies to the sale of most inherited investment assets because there is generally no CGT step-up in cost base at death. The gain is typically calculated using the deceased’s original cost base, not the market value at the date of death, which surprises many beneficiaries who assume inheriting an asset resets its tax history.
Frequently Asked Questions
Does the tax year follow the settlement date or the contract date for a deceased estate’s property sale?
The contract date. This is the ATO’s standard CGT timing rule and it applies to deceased estates the same way it applies to any other property sale.
Can appointing a non-resident executor really change the estate’s tax residency?
Yes. Where the sole executor is a non-resident, the estate is treated as a non-resident trust for tax purposes, which can mean losing the tax-free threshold and losing access to a CGT clearance certificate.
Is FRCGW withholding a final tax, or can the estate get money back?
FRCGW is a withholding, not a final tax. The estate lodges a tax return calculating the actual CGT liability, and any amount withheld above that liability is refunded on assessment.
What if probate takes over a year and the estate hasn’t lodged anything yet?
This is more common than most executors assume, and the ATO’s approach to penalties generally allows for remission where there’s a reasonable cause, such as protracted probate. It’s worth addressing the backlog directly rather than delaying further.
Does the deceased’s own tax residency history affect the estate’s treatment?
It’s a factor, but the residency of the executor at the time of the relevant events is usually the more decisive factor, particularly for CGT purposes.
Can an estate have more than one executor to avoid the non-resident trust problem?
Yes, appointing at least one Australian resident co-executor is a common structuring approach, though this needs to be arranged as part of the will itself or through the court, not after the fact.
About ODIN Tax
ODIN Tax is a Registered Australian Tax Agent and part of ODIN, specialising exclusively in Australian tax matters for expats, non-residents, and overseas beneficiaries, including estate and inherited property scenarios. The team has prepared returns and resolved overdue lodgements for 2,300+ Australian expats across 40+ countries, holding a 4.9/5 Google rating from over 400 verified client reviews. Because ODIN Tax also sits alongside ODIN Mortgage within ODIN, estate-related property sales can be coordinated across tax and settlement logistics rather than handled in isolation. This content is general information only and does not constitute personal tax advice; estate and CGT outcomes depend on individual facts and should be confirmed through a formal consultation.
If you’re an executor or beneficiary dealing with an Australian property sale from a deceased estate while living overseas, get the reporting year and withholding position confirmed before contracts are signed. Get in touch with ODIN Tax to talk through your situation.
References
- Australian Taxation Office: Deceased Estates and Capital Gains Tax
- Australian Taxation Office: Foreign Resident Capital Gains Tax Withholding
- Australian Taxation Office: CGT Event Timing for Property
