Australia abolished inheritance tax in 1979, so beneficiaries generally do not pay tax simply for receiving an inheritance.
11 March, 2026
Inheritance tax in Australia: What you need to know
First Financial Team
We are often asked about Inheritance tax, sometimes called the “Death Tax” The question comes from clients during estate planning or from those who may be receiving a substantial inheritance, such as property or shares.
The short answer is no. Australia abolished inheritance tax in 1979, so beneficiaries generally do not pay tax on receiving an inheritance.
However, this does not mean inherited wealth is completely tax-free. In many cases, taxes can still arise depending on the type of asset inherited and what the beneficiary does with it.
“While Australia does not have an inheritance tax, inherited assets can still create tax obligations depending on how they are used or sold.”
Capital Gains Tax (CGT) on Inherited Assets
One of the most common tax implications associated with inherited assets is Capital Gains Tax (CGT).
When someone inherits assets such as property, shares, or investments, CGT is usually not payable at the time of inheritance. Instead, the tax is triggered when the beneficiary later sells or disposes of the asset.
For CGT purposes, the beneficiary generally inherits the asset’s cost base. This means that if the asset was purchased after 20 September 1985, the cost base is typically the deceased person’s original purchase price.
If it was purchased before that date, the cost base becomes the market value at the date of death.
For example:
- A property purchased by the deceased for $300,000
- Worth $800,000 when inherited
- Sold later for $900,000
The capital gain may be calculated from the original cost base, meaning CGT could apply to the increase in value over time. The family home may be exempt if it qualifies for the main residence exemption and is sold within certain time limits.
Superannuation death benefits
Superannuation can also have unique tax implications when passed on after death.
Unlike most assets in an estate, superannuation does not automatically form part of the estate. Instead, it is typically distributed according to a death benefit nomination. Tax treatment depends on the relationship between the deceased and the beneficiary:
- Tax-free beneficiaries (dependants)
- Spouse or de facto partner
- Minor children
- Financial dependants
These beneficiaries generally receive superannuation death benefits tax-free.
- Non-dependants
- Adult children
- Other relatives or beneficiaries
These recipients may pay tax on the taxable component of super, often around 15% plus the Medicare levy.
Because super balances can be significant, this is one of the most common areas where inheritance may create a tax liability.
Income tax on inherited assets
Another issue is income generated by inherited assets. While the act of inheriting the asset itself is usually tax-free, any income generated by that asset becomes taxable.
Examples include:
- Rental income from an inherited property
- Dividends from inherited shares
- Interest from inherited savings or investments
Once inherited, this income must be declared in the beneficiary’s tax return and is taxed at their marginal income tax rate. This means inherited investment assets can still create ongoing tax obligations.
Foreign inheritances and cross-border tax issues
Inheriting assets from overseas introduces additional complexity.
Australia generally does not tax the receipt of foreign inheritance itself. However, there may still be tax implications depending on:
- The type of foreign asset
- Whether it produces income
Whether the asset is later sold
For example, income earned from overseas investments may still be taxable in Australia, or foreign tax rules may apply in the country where the asset is located.
Cross-border estates often require specialist tax advice to avoid double taxation or compliance issues.
This table helps to summarise the tax implications of an inheritance
Although Australia does not have a direct inheritance tax, planning ahead can still help reduce potential tax liabilities. Effective strategies may include:
- Structuring investments efficiently
- Managing superannuation death benefit nominations
- Using testamentary trusts
- Considering CGT implications before selling inherited assets
Proper estate planning ensures that assets are passed on tax-efficiently and in accordance with the deceased’s wishes.
Whether you’re thinking about your legacy or receiving an inheritance, it is highly recommended to speak with a financial advisor or tax professional in advance. While Australia does not impose a formal inheritance tax, tax implications, including capital gains tax, income tax, and superannuation rules, can still affect inherited wealth. Understanding these rules can help families preserve more of their legacy and avoid unexpected tax bills.
“Understanding the tax rules around capital gains, superannuation and investment income can help families protect more of the wealth they inherit.”
The team at First Financial comprises financial experts who help hundreds of Australians retire well and make informed, intelligent financial decisions. We cover everything from retirement and financial advice, investment and wealth management, superannuation and SMSF, insurance, tax, aged care, legal and lending services. Contact us for holistic, well-rounded financial management strategies
Key Takeaways
Capital gains tax may apply later if inherited assets, such as property or shares, are sold.
Superannuation death benefits may be taxed differently depending on whether the beneficiary is considered a dependant.
Seeking professional financial advice can help families manage inherited assets and minimise potential tax liabilities.
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FAQs
Is there an inheritance tax in Australia?
No. Australia abolished inheritance tax in 1979, so beneficiaries generally do not pay tax simply for receiving an inheritance. However, taxes may still apply later depending on the type of asset and how it is used or sold.
Do you pay capital gains tax when you inherit an asset?
Capital gains tax (CGT) is usually not payable at the time you inherit an asset. Instead, CGT may apply when you later sell or dispose of the asset, such as property or shares.
How is capital gains tax calculated on inherited assets?
In most cases, the beneficiary inherits the original cost base of the asset if it was purchased after 20 September 1985. If the asset was purchased before that date, the cost base typically becomes the market value at the date of death.
Is the family home exempt from capital gains tax when inherited?
The family home may be exempt from CGT if it qualifies for the main residence exemption. This often depends on factors such as whether it was the deceased’s primary residence and how quickly it is sold.
Are superannuation death benefits taxed?
Superannuation death benefits can be tax-free if paid to a dependant, such as a spouse, minor child, or financial dependant. However, non-dependants, such as adult children, may pay tax on the taxable portion of the benefit.
Do inherited assets create ongoing tax obligations?
Yes. While the inheritance itself is usually tax-free, any income generated from the asset, such as rental income, dividends or interest, must be declared and taxed at the beneficiary’s marginal tax rate.
How can First Financial help with inheritance and estate planning?
First Financial helps clients structure their finances to minimise potential tax implications from inherited assets. This can include advice on superannuation death benefit nominations, investment structures and estate planning strategies.
When should you seek financial advice about an inheritance?
It is best to seek advice before selling inherited assets or making major financial decisions. The team at First Financial can help clients understand the tax implications and develop strategies to preserve more of their wealth for the future.