Young people who immigrated to Australia many decades ago are now, like other Australians, experiencing the death of their elderly parents and the inheritance of their assets – including the family home.

But in this case the difference is that their parents may be foreign residents and the home located overseas. In addition, the estate may be dealt with according to the relevant laws of that country.

However, as long as there is a “jurisdictional” connection to Australia, then the Australian tax laws will also apply – and in particular the CGT rules that apply to inherited assets, including the family home.

This “jurisdictional” connection can be by way of the inherited property being located in Australia – or, as more likely, the trustees or beneficiaries of the estate being an Australian resident for tax purposes.

Take for example, the case of an inherited overseas home.

In this case, the Australian CGT rules for inherited homes would apply if the trustee or the beneficiary/s were Australian residents – notwithstanding that it is located overseas.

However, in this case the full CGT exemption for the sale of an inherited home within 2 years would not be available at all. This is because it does not apply where the deceased was an “excluded foreign resident” (as defined) at their time of death.

Likewise, the full CGT exemption for the subsequent occupation of the home as the main residence of a “specified person” (eg a spouse, a beneficiary who inherits the home etc) would not be available for the same reason.

This then means (as for inherited homes that are located in Australia) the relevant partial exemption rules must be used to calculate the extent of the partial exemption – or if in fact no exemption applies at all.

However, interesting, it may be that when applying these “partial exemption” rules that a full 100% exemption may apply, depending on the circumstances.

For example, this may occur where the home was acquired by the overseas parent before 20 September 1985 (ie a pre-CGT home of the deceased) and was, say, occupied by the surviving spouse until its sale.

However, each case will depend on its own facts – and these partial exemption calculation rules can result in a CGT liability in certain circumstances where the deceased was an excluded foreign resident at their date of death.

Suffice to say, the advice of your registered tax adviser is invaluable in such cases.