Australia has no inheritance tax and no estate tax. Whatever you inherit, whether it’s cash, a house, or shares, arrives free of tax at the moment you receive it. What can still land on your desk later are capital gains tax on a future sale, income tax on money the estate earns before it’s wound up, and tax on superannuation death benefits if you weren’t a dependant of the person who died. The Australian Taxation Office confirms this position, and it’s one Simons George Legal deals with in practice every week.
TL;DR:
- Inheriting assets in Australia is tax-free at the moment of transfer, but taxes may apply when you sell assets or generate income from them later.
- Selling an inherited property within two years of the deceased’s death can be fully exempt from capital gains tax if it was the main residence, with possible extensions for delays beyond control.
- Superannuation death benefits paid to dependants are generally tax-free, while non-dependants may face up to 17% tax on the taxable component.
- Foreign assets inherited in Australia may be subject to the foreign country’s inheritance tax and Australian capital gains tax upon sale, with potential double taxation relief.
- Proper estate planning, timely valuations, and professional advice can help avoid common tax pitfalls and streamline estate administration.
Table of Contents
- How Australia’s tax rules apply to inherited assets
- Capital gains tax on inherited assets: exemptions and timing
- Tax treatment of superannuation death benefits
- Estate income, trust tax returns, and present entitlement
- Practical checklist: what beneficiaries and executors should do now
- Funding your legal matter, — No Win, No Fee
- Inheritance tax versus capital gains tax: what’s actually different
- How inheriting assets changes your own tax position
- Did Australia ever have state-based death duties?
- Foreign assets inherited from overseas: what changes
- The role of wills and probate in the tax picture
- A note from George at Simons George Legal
- How Simons George Legal can help beneficiaries and executors
- Sources
- FAQ
How Australia’s tax rules apply to inherited assets
Receiving an inheritance triggers no tax event by itself. What happens next, selling a property, cashing in shares, or drawing down a super death benefit, is where tax rules start to matter, and which rule applies depends entirely on the type of asset.
Most estates involve a mix of the following:
- Real estate, including the family home
- Shares and managed funds
- Collectables such as art, jewellery, or antiques above certain thresholds
- Superannuation death benefits
- Business interests or farming assets
Property, shares, and collectables generally fall under capital gains tax rules once you dispose of them. Superannuation death benefits follow a separate tax regime tied to your relationship with the deceased. And if the estate itself earns income, such as rent or dividends, before assets are distributed, that income has its own reporting rules. Each pathway gets its own detailed treatment below.
Capital gains tax on inherited assets: exemptions and timing
Inheriting a house, a share portfolio, or an investment property doesn’t create a capital gains tax bill. Selling it later can. That distinction trips up more beneficiaries than any other part of estate tax law, and it’s worth understanding properly before you sign a contract of sale.
The main residence exemption is the one most families rely on. If you sell an inherited home within two years of the date of death, and it was the deceased’s main residence at the time of their death, the sale can be fully exempt from CGT regardless of how much the property has grown in value. Miss that window and the exemption may shrink or disappear, depending on how the property was used in the meantime.
The two-year rule isn’t always rigid. Under PCG 2019/5, the ATO can extend the disposal period where genuine delays are outside your control, things like a will being contested, title complications, or a difficult market. Executors dealing with a stalled probate matter shouldn’t assume the exemption is automatically lost.
Assets bought before 20 September 1985 get separate treatment. Because CGT didn’t exist before that date, pre-CGT assets are generally exempt from capital gains tax altogether, though the rules around cost base and improvements since that date still need careful checking.
Working out the actual gain involves a few moving parts:
- Establish the cost base, usually the market value at the date of death for post-1985 assets.
- Track any capital improvements made by the estate or the beneficiary.
- Apply the 50% CGT discount if the combined ownership period (deceased plus beneficiary) exceeds 12 months.
- Account for special cases such as joint tenancy, where ownership passes automatically, or foreign resident beneficiaries, who may lose access to certain discounts.
Non-dependant super death benefits attract tax of up to 17% on the taxable component, including the Medicare levy, a good reminder that “no inheritance tax” doesn’t mean “no tax at all” on inherited wealth.
Tax treatment of superannuation death benefits
Super doesn’t automatically form part of a deceased person’s estate, and the tax treatment depends on who receives it. The ATO splits recipients into two categories: tax dependants and non-dependants.
A tax dependant is typically a spouse, a former spouse, a child under 18, or someone who was financially dependent on the deceased or in an interdependency relationship with them. Adult, financially independent children usually fall outside this definition, even though they’re often the ones inheriting.
- Dependants generally receive super death benefits tax-free, whether paid as a lump sum or income stream.
- Non-dependants typically pay tax on the taxable component at rates up to 17%, including the Medicare levy, when paid as a lump sum.
- The tax-free component of a death benefit is never taxed, regardless of who receives it.
Before assuming either outcome, request a breakdown of the taxable and tax-free components from the super fund, and check whether a binding death benefit nomination is in place. Nominations that have lapsed or were never made properly can send a payout somewhere the deceased never intended, and the tax consequences can shift accordingly.
Estate income, trust tax returns, and present entitlement
While an estate is being administered, it’s treated as a trust for tax purposes, not as an extension of the deceased’s personal tax affairs. That distinction matters because it changes who reports what, and when.
If the estate earns income during administration, rent from a property, dividends, or bank interest, that income needs to be accounted for somewhere. The ATO’s rules on lodging deceased estate returns set out specific conditions requiring a trust tax return, generally tied to income thresholds and how long the estate has been open.
- If you’re “presently entitled” to income from the estate, meaning you have a fixed, unconditional right to it, that income generally needs to go on your own personal tax return.
- The legal personal representative (executor or administrator) may need to apply for a tax file number for the estate, and in some cases an ABN.
- Returns are commonly required within the first three years of administration, and beyond that if the estate keeps generating income.
Executors juggling this alongside grief and family expectations often benefit from a clear breakdown of what estate administration actually involves before returns fall due.
Practical checklist: what beneficiaries and executors should do now
Getting the paperwork right early saves months of back-and-forth later, particularly if a property or share portfolio needs to be sold.
- Locate the will and confirm the legal personal representative. Everything else follows from knowing who has authority to act.
- Get a formal valuation at the date of death. This becomes your CGT cost base and is far easier to obtain now than years later.
- If selling a property, check the two-year window immediately. Confirm whether it was the deceased’s main residence and whether an extension might apply.
- If you’re presently entitled to estate income, keep every piece of trustee correspondence. You’ll need it at tax time.
- Flag complex situations early. Large embedded capital gains, overseas assets, blended family structures, or a contested will are all reasons to get advice before, not after, you act.
Pro Tip: Take dated photos and get a written valuation the week probate is granted, not the week you list the property. Values move, and the ATO will want evidence tied to the date of death, not the date you got around to it.
Keep a simple folder, physical or digital, with acquisition dates, renovation invoices, super statements, and all executor correspondence. It’s the single easiest way to avoid a scramble later, and it makes life significantly easier if you engage a lawyer to check your estate administration steps.
Funding your legal matter, — No Win, No Fee
Legal costs shouldn’t stop someone with a genuine claim from acting. Simons George Legal offers offer conditional fee arrangements for eligible matters, including contested wills and family provision claims, so you’re not paying upfront while your case is assessed and progressed.
Eligibility is worked out during a free initial consultation, at which point the firm looks at the strength of your claim, the assets involved, and the likely path forward. If your matter qualifies, you can move ahead without the usual barrier of legal fees sitting between you and a fair outcome.
If you believe you’ve been left out of a will unfairly, or an estate isn’t being administered properly, book a free case assessment contact Simons George Legal to find out where you stand.
No Win, No Fee arrangements are subject to case eligibility and a written costs agreement. Liability limited by a scheme approved under Professional Standards Legislation.
Inheritance tax versus capital gains tax: what’s actually different
These two get confused constantly, partly because overseas headlines about “death taxes” get applied to Australia where they simply don’t fit. An inheritance tax, the kind found in the United Kingdom or parts of Europe, is charged on the value of an estate or gift at the point of transfer. Australia abolished that concept decades ago and has no equivalent at either the federal or state level.
Capital gains tax works completely differently. It’s not triggered by inheriting an asset at all. It only applies later, when you dispose of that asset, and it’s calculated on the growth in value from the original cost base, not on the asset’s total worth. A beneficiary who inherits a $2 million property pays nothing at the point of inheritance. If they later sell it for $2.3 million, CGT is calculated on the $300,000 gain (adjusted for the cost base rules), not the full sale price.
The practical difference shows up in timing and control. An inheritance tax would hit you immediately and regardless of what you do with the asset. CGT only bites if and when you choose to sell, which gives beneficiaries genuine flexibility, hold the property, keep the shares, or sell strategically across financial years to manage the tax outcome.
Where people get caught out is assuming “no inheritance tax” means “no tax ever.” It means no tax at the moment of transfer. Everything that happens afterwards, sales, estate income, super payouts, runs through the ordinary tax system like any other transaction.
How inheriting assets changes your own tax position
An inheritance doesn’t just sit there tax-free forever once you receive it. From the day you own an inherited asset, it behaves like any other asset in your portfolio for tax purposes, and that shifts your personal tax situation in ways worth planning for.
If you inherit a rental property, the rental income it generates from that point forward is assessable income on your own tax return, just like any investment property you’d bought yourself. Inherit a share portfolio and the dividends start counting as your income the moment you become the legal owner, generally from the date of death, even before the estate formally transfers the shares to you.
This can push some beneficiaries into a higher tax bracket, particularly if the inherited asset is substantial or arrives on top of an already solid income. A beneficiary earning $95,000 who inherits a fully-tenanted investment property might find the added rental income tips them into a new marginal rate, something worth discussing with an accountant before, not after, the property settles.
Inherited superannuation death benefits paid as an income stream can also affect your assessable income differently depending on your age and the tax-free versus taxable split of the benefit. It’s a separate calculation from the lump sum scenario covered earlier.
None of this is a reason to avoid or delay accepting an inheritance. It’s simply a reason to factor the new income stream into your tax planning for the financial year you receive it, particularly if you’re managing other income sources alongside it.
Did Australia ever have state-based death duties?
Yes, and this history explains why so much confusion persists. Every Australian state and territory once levied death duties, taxes charged on a deceased person’s estate before assets could pass to beneficiaries. These were separate from, and in addition to, any federal estate tax that existed at the time.
Queensland was first to scrap its death duties in 1977, largely to attract retirees and investment from interstate. The move triggered a domino effect, other states risked capital and population flight if they kept taxing estates while Queensland didn’t. The federal government abolished its estate duty in 1979, and by 1984 every remaining state had followed suit.
There is no current state or territory in Australia that charges death duties, estate tax, or inheritance tax today. This is a genuinely settled area of law, not a grey zone or a policy under live debate at state level.
Where the confusion resurfaces is around unrelated state-based charges that sometimes get lumped in with “death taxes” in casual conversation, stamp duty on property transfers in some circumstances, or land tax that continues to apply to a property while it sits in a deceased estate. These aren’t inheritance taxes. They’re ordinary state taxes that apply based on asset type and use, and they’d apply whether the property was inherited or bought outright.
Foreign assets inherited from overseas: what changes
Inheriting property, shares, or bank accounts located overseas doesn’t change the core Australian position. There is still no Australian inheritance tax on receiving the asset itself. What changes is the complexity of everything that follows.
The country where the asset is located may have its own inheritance or estate tax regime, and many do. The United Kingdom, for instance, applies inheritance tax on UK-situated assets in some circumstances, regardless of where the beneficiary lives. That’s a foreign tax obligation entirely separate from Australian law, and it needs to be checked against the specific country’s rules, not assumed away.
Once you sell a foreign inherited asset, Australian CGT can still apply, since Australian tax residents are generally taxed on worldwide capital gains. This is where things get genuinely complicated: you may face a foreign tax on the disposal itself, plus Australian CGT on the same transaction. Double taxation agreements between Australia and many countries exist precisely to prevent being taxed twice on the same gain, but claiming that relief correctly requires care and usually a foreign tax credit calculation.
Currency conversion adds another layer. The cost base and sale proceeds for a foreign asset generally need to be converted to Australian dollars at the relevant exchange rates for the respective dates, not a single average rate.
If you’ve inherited anything overseas, treat it as a distinct matter requiring both local foreign advice and an Australian accountant or lawyer familiar with cross-border estates, rather than assuming your domestic knowledge covers it.
The role of wills and probate in the tax picture
A will doesn’t create tax liability, and probate isn’t a tax process. But both shape how smoothly the tax obligations covered above actually get resolved, and a poorly drafted will or a delayed probate application can turn a straightforward tax position into a genuinely messy one.
Probate is the court process that confirms a will is valid and gives the executor legal authority to deal with the deceased’s assets. Until probate is granted, banks, share registries, and land title offices generally won’t release or transfer assets, which means the “date of death” valuations and cost base figures discussed earlier need to be locked in even before probate finalises, since that’s the reference point the ATO uses, not the date administration wraps up.
Where a will is silent, ambiguous, or contested, tax obligations don’t pause while the dispute plays out. Estate income keeps accruing, present entitlement questions still need answering, and the two-year CGT window on a main residence keeps ticking, which is precisely why contested estates so often end up needing an extension request under the ATO’s discretionary rules.
A well-drafted will, including proper use of testamentary trusts where appropriate, can also directly influence future tax outcomes for beneficiaries, particularly around how income is distributed and taxed in the years after death. This is one of the clearest places where good estate planning while you’re alive saves your beneficiaries real money and stress later.
A note from George at Simons George Legal
The biggest misconception I see isn’t complicated, it’s the belief that Australia has some hidden “death tax” waiting to catch people out. It doesn’t. What catches people out is far more mundane: no valuation done at the date of death, a missed two-year window on the family home, or a super nomination nobody checked in a decade.
My advice is always the same. Get a valuation early, even before probate is finalised. Keep every piece of correspondence with the trustee or executor. And if the estate involves a testamentary trust, a contested will, or assets sitting offshore, get advice before you make decisions, not after. Complex situations rarely fix themselves cheaply in hindsight. If your situation has any of those features, a complimentary consultation is a genuinely useful first step.
— George
How Simons George Legal can help beneficiaries and executors
Sorting out an inheritance shouldn’t mean sorting through tax law on your own. Simons George Legal works with beneficiaries and executors across Sydney, the Eastern Suburbs, and regional NSW on exactly the situations covered in this guide, from straightforward probate applications to contested estates where the tax and legal questions get tangled together.
The firm’s core work spans will drafting, probate and estate administration, contested will litigation, and testamentary trust structuring, the kind of planning that prevents the CGT and super headaches discussed above before they happen. New clients get a complimentary 30-minute consultation, and it’s worth bringing along any valuations you already have, a copy of the will, and any correspondence from the estate’s trustee or executor so the advice is specific to your numbers, not generic.
If you’re an executor trying to work out your obligations, start with the probate and estate administration page. If you’re setting up or updating your own will with these tax rules in mind, the wills and estates team can walk you through your options directly.
FAQ
How much can you inherit tax-free in Australia?
There’s no limit, Australia has no inheritance tax, so the full value of whatever you inherit passes to you tax-free at the point of transfer.
Do I have to pay capital gains tax if I inherit a property worth $300,000?
Not on the inheritance itself. CGT only applies if you later sell the property, and if it was the deceased’s main residence and you sell within two years of death, the sale can be fully exempt.
Why did Australia abolish inheritance tax?
Queensland scrapped its death duties in 1977 to attract residents and investment, prompting other states to follow to avoid losing population and capital, and the federal estate duty was abolished in 1979.
Do you have to declare an inheritance to the ATO?
You don’t declare the inheritance itself, since it’s not taxable income. You do need to declare any income the inherited asset later generates, such as rent, dividends, or a taxable super death benefit component.
What’s the difference between inheritance tax and capital gains tax in Australia?
Inheritance tax would apply to the value of an estate at transfer and doesn’t exist in Australia. Capital gains tax only applies later, and only on the growth in value when you sell an inherited asset.