Do you pay tax on inheritance in Australia?
One of the most common questions beneficiaries ask is whether they'll be taxed on what they inherit. The short answer is no, Australia abolished inheritance tax in 1979. But the longer answer is more nuanced, because several other taxes can apply to inherited assets depending on what you inherit and what you do with it.
Australia has no inheritance or estate tax
Unlike the United Kingdom, the United States, or many European countries, Australia does not levy a tax on the transfer of assets at death. When you inherit cash, shares, property, or personal possessions, the inheritance itself is not taxable income and doesn't need to be reported on your tax return.
This applies whether you inherit $10,000 or $10 million. There is no threshold, no scale, and no reporting requirement on the receipt of an inheritance.
Capital gains tax on inherited property
This is where most beneficiaries encounter tax. When you inherit property, you don't pay CGT at the point of inheritance, but you may pay it later when you sell.
The rules depend on when the deceased acquired the property and whether it was their main residence:
- Property acquired by the deceased before 20 September 1985 (pre-CGT). When you sell, your cost base is the market value at the date of death.
- Property acquired on or after 20 September 1985. You inherit the deceased's cost base, what they originally paid, plus improvements and holding costs.
- Deceased's main residence. If you sell within 2 years of the date of death, the sale is generally CGT-exempt. If you sell later, CGT may apply, calculated from the date of death.
The 2-year main residence rule is the most important one to be aware of. If the deceased's home was their principal place of residence and you sell within 2 years, you generally pay no CGT regardless of how much the property has appreciated. Miss that window and you can be looking at a significant tax bill. See our guide on what happens to the family home for more detail.
Superannuation death benefits
Superannuation is treated differently from other inheritances because it's not technically part of the deceased's estate. Super is held in trust, and the trustee decides who to pay it to (subject to any binding death benefit nomination).
Whether a super death benefit is taxed depends on who receives it:
- Tax dependants (spouse, de facto partner, minor children, financial dependants, interdependent partners) — receive death benefits tax-free.
- Non-tax dependants (typically adult independent children) pay tax on the taxable component of the super benefit. The rate is 15% plus Medicare levy on the taxed element, and 30% plus Medicare levy on any untaxed element.
The tax dependant versus non-tax dependant distinction is one of the most consequential in Australian estate law. An adult independent child inheriting a $500,000 super balance could pay $80,000 or more in tax, while a spouse inheriting the same balance pays nothing.
Income earned by inherited assets
If you inherit an asset that produces income such as a rental property, dividend-paying shares, an interest-bearing account — the income is taxable to you from the date you receive the asset. Income earned by the estate before distribution is taxed to the estate, not to you.
For inherited shares, you also step into the deceased's cost base for CGT purposes when you eventually sell. Dividends received after distribution are yours and go on your tax return.
Stamp duty on inherited property
In most states, transferring property from an estate to a beneficiary named in the will (or entitled under intestacy) does not attract stamp duty — a nominal transfer fee applies instead. However, if beneficiaries agree to transfer property between themselves (for example, one buys out the others), stamp duty may apply to that transfer.
How inheritance advances are treated for tax
An inheritance advance is not itself taxable. It's an advance against your inheritance, not income. The full inheritance still passes through the estate to you, and any tax consequences of the underlying assets (CGT on later sale of property, for example) are unchanged by the fact that you accessed part of your entitlement early.
Frequently asked questions
Do I need to declare an inheritance on my tax return?
Not the inheritance itself. But income earned by inherited assets after the date of transfer, capital gains from selling inherited assets, and taxable super death benefit components all need to be declared.
What if I inherit from overseas?
Australia doesn't tax the inheritance itself, but the country where the deceased lived might. If the foreign estate paid inheritance tax before transferring assets to you, you receive what's left. Ongoing income from foreign inherited assets is generally assessable in Australia.
Should I get advice?
Yes, particularly for inherited property, superannuation, or business interests. The rules are workable but the details matter, and the tax outcomes of small decisions (like when to sell inherited property) can be significant.
This is general information only and does not constitute legal, tax, or financial advice. Speak to a qualified professional about your circumstances.
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