Australia Has No Inheritance Tax or Estate Tax
Unlike many countries, Australia abolished inheritance and estate taxes in 1979. However, there are potential tax implications when inheriting certain assets, particularly investment property, shares, and superannuation death benefits for non-dependants.
Property
Shares / Investments
Superannuation Death Benefit
The tax-free component is not taxed. Only the taxable component may be taxed for non-dependants.
Spouse, child under 18, financial dependant, or interdependant -- super is tax-free.
Estate Value
$1,500,000.00
Net to Beneficiary
$1,494,212.00
Potential Tax
$5,788.00
Effective Rate
0.4%
Inheritance Tax
Estate Breakdown
No Inheritance Tax in Australia
Australia abolished all forms of inheritance tax, estate duty, and death duties in 1979. When you inherit assets, there is no direct tax on the inheritance itself. However, there may be tax consequences when you later dispose of inherited assets, or for superannuation death benefits paid to non-dependants.
CGT on Inherited Assets
When the beneficiary later sells inherited assets (shares, investment property), CGT may apply. The cost base is typically the original cost paid by the deceased (not the market value at death). The main residence exemption continues to apply for up to 2 years after death.
Super Death Benefits -- Who is a Dependant?
For tax purposes, a death benefit dependant includes: your spouse (including de facto), children under 18, anyone financially dependent on you, or someone in an interdependency relationship. Adult children over 18 are generally NOT tax dependants for super purposes.
Super Components
Super death benefits have two components: tax-free and taxable. The tax-free component is never taxed regardless of who receives it. The taxable component is tax-free for dependants but taxed at 15% + 2% Medicare levy for non-dependants.
Binding Death Benefit Nominations
To direct where your super goes (and potentially minimise tax), you can make a binding death benefit nomination with your super fund. This ensures your super is paid to your nominated dependants tax-free rather than going through your estate.
Disclaimer: Estate planning is complex and depends on individual circumstances. This calculator provides estimates only. Consult an estate planning lawyer and tax professional for personalised advice.
Australia has no inheritance tax, but there are still tax implications when someone passes away
Does Australia have an inheritance or estate tax?
No. Australia abolished federal estate and inheritance taxes in 1979. There is no tax on receiving an inheritance. If a relative leaves you A$500,000 in their will, you do not pay any tax on that amount. However, there can be capital gains tax (CGT) implications on inherited assets when you eventually sell them, and the deceased person's estate may have a final tax return to lodge.
What happens with the deceased person's tax return?
The executor or legal personal representative must lodge a final tax return for the deceased, covering the period from 1 July to the date of death. Any income earned during that period — salary, rent, interest, dividends — is taxable. The ATO assesses this return and any tax owed is paid from the estate before assets are distributed. The deceased gets the usual tax-free threshold and marginal rates.
How does CGT work on inherited property?
If you inherit a property that was the deceased's main home and you sell it within two years, there is usually no CGT. If you keep it longer or rent it out, CGT applies when you sell. The cost base depends on when the property was acquired. For properties bought after 20 September 1985, you inherit the original cost base. For pre-1985 properties, the cost base is the market value at the date of death.
What about inherited shares and investments?
Shares and investments pass to you with the deceased's original cost base. When you sell them, you calculate the capital gain from their original purchase price, not the value at the date of death. If the deceased bought shares for A$10,000 and they are worth A$50,000 when you inherit them, your cost base is A$10,000. When you sell for A$60,000, your capital gain is A$50,000, not A$10,000.
How is superannuation taxed when someone dies?
Super death benefits paid to a tax dependant (spouse, child under 18, or financial dependant) are tax-free regardless of the amount. If paid to a non-tax dependant (like an adult child), the taxable component is taxed at up to 32% (including Medicare Levy). For example, if a A$400,000 super balance has A$300,000 in taxable component and is paid to an adult child, they could pay up to A$96,000 in tax.
What is an estate and how is it administered?
The estate is everything the deceased owned — property, savings, investments, super (if directed to the estate), and personal belongings. The executor named in the will (or an administrator appointed by the court if there is no will) manages the estate. They pay any debts, lodge the final tax return, obtain probate if needed, and distribute assets according to the will. This process can take several months to over a year.
Are there any ongoing tax obligations for the estate?
Yes. The estate itself can earn income (such as rent or interest on bank accounts) between the date of death and when assets are distributed. The executor must lodge a trust tax return for the estate for each year it operates. Income distributed to beneficiaries is taxed at their personal rates. Income retained in the estate is taxed at individual rates with a tax-free threshold for the first year.
How can you minimise the tax impact on your estate?
Consider nominating tax dependants as your super beneficiaries to avoid super death benefit tax. Ensure your main home exemption is preserved. If you have assets with large unrealised capital gains, think about whether to sell them during your lifetime to use the 50% CGT discount. A well-structured will and estate plan can save your beneficiaries tens of thousands of dollars. Seek advice from a financial planner or estate lawyer.
ATO-Aligned: Based on 2024-25 ATO rates and thresholds. For personal advice, speak to a qualified tax agent.
Disclaimer: This calculator provides estimates based on current ATO rates and thresholds for the 2024–25 financial year. It does not constitute professional tax, financial, or legal advice. Your actual liability may differ depending on your individual circumstances. Always consult a qualified tax agent before making financial decisions. Read our terms
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