Inheriting money or property can be life-changing—but it also comes with important financial decisions. While Australia doesn’t have a formal inheritance tax, there are still tax rules you need to understand to protect your wealth and avoid unexpected liabilities.
Understanding the tax implications of inherited assets is essential to protecting your wealth and making informed decisions.
Let’s break it down.
Is There Inheritance Tax in Australia?
No, there is no inheritance tax in Australia. This means you won’t pay tax simply for receiving an inheritance—whether it’s cash, property, or shares.
However, that doesn’t mean there are no tax consequences. Depending on what you inherit and how you use it, other taxes may apply.
What You Still Might Pay Tax On
While the inheritance itself isn’t taxed, you may still face tax obligations depending on the type of asset and how you use it:
- Capital Gains Tax (CGT): Applies if you sell inherited assets like property or shares. The cost base is usually the market value at the date of death.
- Income Tax: Applies to income generated from inherited assets, such as rent from property or dividends from shares.
- Superannuation Death Benefit Tax: May apply depending on:
- Your relationship to the deceased (e.g. dependent vs non-dependent)
- Whether the benefit is paid as a lump sum or income stream
- The taxable components of the superannuation.
Superannuation and Tax on Death Benefits
Superannuation death benefits can be complex, and how they’re taxed depends on who receives the benefit and how it’s paid.
- If the benefit is paid to a tax-dependent (e.g. a spouse, child under 18, or someone in an interdependency relationship), it is generally tax-free, whether paid as a lump sum or income stream.
- If the benefit is paid to a non-dependent (for tax purposes), it must be paid as a lump sum, and the taxable component is taxed at:
- 15% for the taxed element
- 30% for the untaxed element
These rates exclude the Medicare levy, which may also apply.
Capital Gains Tax and Inherited Assets
Inherited property or shares are not immediately subject to Capital Gains Tax (CGT). However, if you sell or otherwise dispose of the asset later, CGT may apply.
The cost base for CGT purposes is generally the market value of the asset at the date of the deceased’s death, unless the asset was acquired before 20 September 1985 (when CGT was introduced). If the deceased acquired the asset before that date, it is considered a pre-CGT asset, and you are taken to have acquired it at market value on the date of death. CGT may still apply if you later dispose of the asset.
If the inherited property was the deceased’s main residence and not used to produce income, and you sell it within two years of their death, you may be eligible for a full CGT exemption—even if you rented it out or didn’t live in it during that time.
You may also apply for an extension beyond the two-year period if the delay in selling was due to exceptional circumstances outside your control, such as legal disputes or delays in estate administration.
How to Minimise Tax on Inheritance
While Australia doesn’t have inheritance tax, there are smart strategies to reduce tax on inherited assets:
- Sell inherited property within two years to potentially avoid Capital Gains Tax (CGT), especially if it was the deceased’s main residence and not used to produce income.
- Use a testamentary trust to distribute income to minors at adult tax rates, which can be more tax-effective than standard trusts.
- Invest in superannuation (if eligible) to take advantage of concessional tax treatment on contributions, earnings and withdrawals.
- Seek professional advice to structure your assets and income streams tax-efficiently, especially when dealing with superannuation death benefits or large estates.
What to Do if You’re Receiving an Inheritance
- Pause and reflect – avoid making rushed financial decisions.
- Understand what you’ve inherited – cash, property, shares, superannuation?
- Get advice – a financial adviser can help you navigate tax, investment, and estate planning.
- Create a plan – align your inheritance with your long-term financial goals.
Book a consultation with an experienced financial adviser
At Solace Financial, we don’t just help you manage your inheritance—we help you make it count. Whether you’re navigating complex tax rules, planning for retirement, or securing your family’s future, our expert advisers are here to guide you every step of the way.
Your inheritance is an opportunity. Let’s make the most of it
Book your free consultation today and take the first step toward confident, informed financial decisions.
Frequently Asked Questions
Do I pay tax on money I inherit from my parents?
No, inheritance itself is not taxed in Australia. However, you may pay tax on income generated from that money (e.g. bank interest, rent) or Capital Gains Tax (CGT) if you sell inherited assets like property or shares.
What is the superannuation death benefit tax rate?
If you’re a non-dependent (for tax purposes), you may pay up to 15%–30% tax on the taxable component of a super death benefit. If you’re a dependent (e.g. spouse or child under 18), the benefit is generally tax-free.
Can I avoid paying tax on inherited property?
Yes, if you sell the property within two years of the deceased’s death and it was their main residence not used to produce income, you may be eligible for a full CGT exemption.
Is a deceased estate subject to income tax?
Yes. A deceased estate may need to lodge tax returns until it is fully administered. The estate is treated as a separate taxpayer during this period.
What’s the role of a testamentary trust?
A testamentary trust can help distribute income to beneficiaries—especially minors—tax-effectively, and can also provide asset protection and flexibility in estate planning.
Does CGT apply if I keep the inherited property?
No, CGT is only triggered when you sell or dispose of the property. Simply holding the property does not result in a CGT event.
Book a free consultation
Take comfort in your financial future with Solace Financial
