How Inheritance Is Taxed in Australia: A Simple Guide for Families and Executors
Table of contents
Receiving an inheritance can bring tax questions at an already difficult time. While Australia doesn’t currently have a formal inheritance tax or death duty, other tax obligations may still arise from inherited property, investment income and superannuation death benefits.
This guide explains how inheritance is taxed in Australia, when capital gains tax or income tax may apply and what to consider when planning or managing an estate.
Is there inheritance tax in Australia?
Do you pay tax on inheritance? Technically, the inheritance tax Australia-wide no longer exists, at least not in the same form as in the United States, the United Kingdom and other countries. What we mean is, there is no direct tax or government levy on the value of an inheritance when it is transferred to beneficiaries.
That said, there are still other tax liabilities that can be triggered based on what you do with the assets when they’re in your possession. The main taxes you should think about include:
Though you won’t pay a dedicated inheritance tax upfront, understanding the associated taxes is still critical to responsible financial and estate planning.
Why is death tax being discussed again?
Australia does not have inheritance tax, estate tax or death duty. However, the issue returned to public discussion in 2025 after policy proposals from the Australia Institute suggested inheritance tax changes for large estates.
As of 2026, this remains a policy proposal rather than current law. Inheritance is not taxed in Australia simply because money or assets pass to a beneficiary, although other obligations may arise from inherited property, income or superannuation.
Capital gains tax and inherited property
The capital gains tax is one of the main ways you can incur tax liabilities from your inherited assets, like real estate or shares, as an Australian.
When does CGT apply?
You don’t pay CGT at the point of inheritance. CGT is assessed when you dispose of the asset, however. This is when you gift, sell or transfer an inheritance. The cost base used to calculate the gain can depend on when the deceased acquired the asset, how it was used and whether it was their main residence. For example, market value at the date of death may apply to some assets acquired before 20 September 1985.
What does this mean? Well, if, for example, you inherit a home but sell it at a higher market price five years later, you could be liable for capital gains tax on any increase in value. Yet, if the inherited property was the deceased person’s primary residence and wasn’t used to produce income, a full or partial exemption could apply.
Exemptions and reductions to CGT
Several CGT exemptions or concessions may apply to inherited assets:
- Main residence exemption: A full or partial exemption may apply if the property was the deceased person’s main residence and meets the relevant conditions.
- Two-year rule: A full exemption may apply if an eligible inherited property is disposed of under a contract that settles within two years of the deceased person’s death. Extensions may be available in some circumstances.
- 50% CGT discount: You may qualify for the 50% CGT discount if the relevant ownership requirements are met.
Income tax on inherited assets
You don’t pay income tax just for receiving an inheritance. However, income generated by inherited assets, such as rent, dividends or interest, may still be taxable. Depending on the stage of estate administration, that income may need to be reported by the estate or by the beneficiary entitled to receive it.
Rental income
If an inherited property is rented out, tax generally applies to the net rental income after eligible expenses are deducted. These may include property management fees, repairs, insurance and certain interest costs.
Dividends and interest
If you inherit bank accounts or shares, on the other hand, dividends earned from inherited shares are subject to income tax, with interest from savings or term deposits also considered taxable.
This ongoing income is not considered part of the Australian inheritance tax framework. That said, it’s still important to account for it in your annual tax planning.
Tax on superannuation death benefits
Superannuation is treated differently from other inherited assets. The tax outcome can depend on who receives the benefit, whether they are considered a dependant for tax purposes and whether the payment includes taxed or untaxed components.
Tax-free situations
Superannuation may be paid to a child under 18, a spouse or de facto partner, a person who is financially dependent on the deceased or another type of tax-dependent beneficiary. In this case, the superannuation death benefit is then generally tax-free.
Taxable situations
If a lump sum death benefit is paid to a non-dependant for tax purposes, the taxed element of the taxable component may be taxed at up to 15% plus the Medicare levy. The untaxed element may be taxed at up to 30% plus the Medicare levy.
Superannuation isn’t automatically part of an estate unless a binding death benefit nomination directs this. This is why proper planning is so essential.
Overseas assets and inheritance tax
What happens if you inherit assets located overseas? In this situation, you can still face foreign inheritance tax or estate duties, depending on the laws of the country.
If an estate includes UK assets, UK inheritance tax may apply depending on the estate’s value, the deceased person’s circumstances and any available exemptions. Receiving overseas income or selling a foreign asset could also have Australian tax implications under global income reporting rules.
How can you minimise tax liabilities with strategic planning?
Though Australia doesn’t have an inheritance tax, good planning can still eliminate or reduce the tax obligations associated with managing inherited assets.
Strategic asset disposal
Before deciding when to sell an inherited property, consider the two-year CGT rule and obtain advice about how it applies to your circumstances.
If managing costs while administering the estate is a concern, our estate funding application takes just a few minutes to complete. You only repay once the estate is finalised.
Testamentary trusts
A testamentary trust can be established through a will and comes into effect after the person who made the will dies. It may provide flexibility in distributing income among beneficiaries, including minor children. A testamentary trust may also offer tax-planning and asset-protection benefits, although the outcome depends on how it is structured and administered.
Speak to JustFund about estate funding
Managing an estate can involve legal fees, probate costs, property expenses and other bills before estate assets are ready to be distributed. This can place pressure on executors and beneficiaries who need to keep the administration moving but don’t have enough accessible cash to cover every cost upfront.
At JustFund, we may be able to help eligible clients access estate funding for approved expenses, including legal support and costs connected with administering the estate. Funding may also provide eligible beneficiaries with early access to part of their expected inheritance, helping them manage immediate financial needs while the estate is being finalised.
For more information about applying for funding to assist with the costs of estate administration or early access to your estate assets, apply now, fill out our form or contact us directly at enquiries@justfund.com.au or 1300 644 980 to see if you qualify.
Disclaimer: This article provides general information about inheritance-related tax issues in Australia and may not apply to your estate, assets or personal circumstances. Tax treatment can depend on factors such as the type of asset, how it is used, who receives it and when it is sold. Seek advice from a qualified legal, tax or financial professional before making decisions about an inheritance or deceased estate.