UK Inheritance Tax (IHT) doesn’t go away if you move to Australia or become an expat – at least it doesn’t immediately.

This is because the liability of a deceased person’s estate to UK IHT is a function of the individual’s domicile status in the UK, rather than residency.

Note: Inheritance Tax is a tax which usually affects the estate of someone who has died.

Anyone who is domiciled in the UK is liable to IHT on their worldwide assets.

Those who are not domiciled in the UK are only subject to UK IHT on estate that is located in the UK, such as real estate in the UK, or bank accounts maintained in the UK.

There are 3 types of domicile under UK tax law for adults:

• A domicile of origin. When a person is born, s/he acquires the domicile which his/her father considered to be his real or permanent home at the date of your birth. If the individual’s parents were not married when s/he was born, the domicile of origin is usually the same as the mother’s.
• A domicile of choice. To acquire a domicile of choice:
  • The person must show that s/he has settled permanently in the jurisdiction in which s/he now considers him/her self domiciled.
  • The person must intend to stay there for the rest of his/her life.
• A deemed domicile. You are treated as being domiciled in the UK if you:
  • Were resident in the UK for 17 of the last 20 UK tax years, or
  • Had your permanent home in the UK at any time in the last 3 years of your life

Importantly, changes – the UK Government terms these as “reforms” – are on the way in respect of domicile.

These changes are discussed here.

Under these changes – which became law from the 6th of April, 2017 – a deemed domicile in the UK will arise when an individual has been a resident of the UK for 15 out of the last 20 UK tax years, rather than the 17 out of 20 years that applied previously.

Consideration is often also required of tax residency in the UK.

Since the 6th of April, 2013 the UK has had a Statutory Residency Test (SRT) in place, which provides a measure of certainty over a taxpayer’s residency status in the UK, particularly when departing the UK to live and/or work overseas, or arriving in the UK to live and/or work.

While providing certainty, the SRT is complex, and for those seeking clarity on their domicile status when departing the UK the exercise is also likely to require a consideration of UK residency status.

While few of us like contemplating our own mortality, those who are living in Australia with estate valued at more than the IHT nil rate band should consider taking professional advice if there is a wish to ensure that as much of the estate as possible is passed onto our loved ones.

This should include a consideration of taxes arising on death in Australia: while Australia does not have an equivalent to Inheritance Tax, an estate can find itself subject to capital gains tax in Australia when investment assets of the estate are bequeathed to a person who is not a tax resident of Australia.

This can be overcome – often through the use of what is called a testamentary trust – but again, professional guidance will be desirable when drafting a Will, most probably in Australia and the UK.

In an earlier post we discussed whether Medicare in Australia is available if you have applied for an onshore visa such as an Aged Parent subclass 804 visa.

We have communicated with the Department of Human Services, and the position has been confirmed as follows:

• When a person has an application for a Parent visa (subclass 804) with Department of Immigration and Border Protection (DIBP) s/he is only eligible to enrol in Medicare if s/he was residing in a Reciprocal Health Care Agreement (RHCA) country immediately before arriving in Australia.
• The Australian Government has signed Reciprocal Health Care Agreements (RHCA) with the Governments of Belgium, Finland, Italy, Malta, the Netherlands, New Zealand, Norway, the Republic of Ireland, Slovenia, Sweden, and the United Kingdom.
• These Agreements provide eligible visitors to Australia with access to limited subsidised health services for medically necessary treatment.
• The following services are generally covered under each RHCA:
  • Medicare benefits for medically necessary out-of-hospital treatment (except for New Zealand and the Republic of Ireland)
  • Medically necessary treatment as a public patient in a public hospital including pregnancy related services. Person seeking treatment must provide individual hospitals with a valid RHCA Medicare card or visitors from the Republic of Ireland or New Zealand must provide their passport or documents to confirm residency with that country
  • Medicines available on prescription which are subsidised under the Pharmaceutical Benefits Scheme (PBS)
• The period of entitlement varies depending on the Agreement with the individual country. More information about these Agreements can be found at the Department of Human Services website (click on Visitors to Australia).
• Students from Norway, Finland, Malta and the Republic of Ireland aren’t covered by Agreements with those countries.

Medically necessary treatment relates to a medical condition that needs immediate attention, and pertains to any ill health or injury which occurs while an individual is in Australia.

The Australian Government only has Reciprocal Health Care Agreements with the countries listed above. If you are applying for an Aged Parent visa and are not covered by a RHCA you should consider taking out suitable private health insurance: complete the enquiry form to the right of this page (click on Other, and type Private Health Insurance details for visitors to Australia please in the box) to receive contact details for private health funds we know of that provide private health cover for visitors to Australia.

As many will know, the Department of Immigration’s Visa Application Charges (VACs) for Contributory Parent Visas are not cheap – particularly the main VACs payable immediately prior to the granting of the visa.

For a single applicant these presently amount to A$43,600; for a couple the VACs total A$87,200.

The Department of Immigration is happy to accept a payment  by credit card, but will levy a surcharge for this: presently, the surcharge when paying by VISA or MasterCard is 0.98%.

This means there is an additional cost of A$427.28 when the VAC for a single applicant is paid by VISA or MasterCard, or A$854.56 when using a VISA or MasterCard to pay the VACs for a couple.

Added to this, the rate of exchange if using a credit card denominated in a currency other than A$’s will be to the advantage of the card issuer.

For this reason we suggest that applicants for Contributory Parent Visas consider arranging a bank draft to pay the main VACs.

Rather than obtaining an A$ bank draft through a High Street bank we recommend approaching one of the specialist forex companies to obtain a bank draft denominated in A$’s.

We are aware of the following 3 specialist forex companies in the UK that can arrange bank drafts – we invite those who need to make a payment to the Department of Immigration to make enquiry of one or more of these companies as to how they might help.

• HiFX, T (UK) 01753 752 740
• Halo Financial, T (UK) 020 7350 5473
• Moneycorp, T (UK) 020 3823 0204

The same companies can also assist with the transfer of funds to your bank account in Australia in due course; their rates of exchange when selling £’s to buy A$’s are likely to be a significant improvement on the rates available from the High Street banks.

Please feel able to mention Go Matilda Visas if you are asked how you heard of them!

In response to an enquiry we have made of the Department of Immigration’s Parents Visa Centre we have been advised that the allocation of the total program number for non-Contributory Parent visas for the program year ended the 30th of June 2017 between subclass 103 and 804 is expected to be as follows:

• 1,350 to subclass 103
• 150 to subclass 804