Inheritance Tax Australia: Everything You Need to Know in 2025

Australia has a unique stance when it comes to taxing inheritance. If you’ve recently inherited money, property, or superannuation, you may wonder: Is inheritance taxed in Australia? The short answer is no, but there are some important exceptions you need to understand.

In this guide, we’ll break down the facts about inheritance tax in Australia, explain when tax does apply, and show you how to manage inherited assets the right way.

What Is Inheritance Tax?

Inheritance tax (also known as estate tax or death duty) is a levy imposed on individuals who inherit assets from someone who has died. In many countries, beneficiaries must pay a percentage of the inherited value as tax.

However, in Australia, inheritance tax no longer exists as a separate tax category.

Is There Inheritance Tax in Australia?

No, there is currently no inheritance tax in Australia.

All states and territories abolished death duties between 1977 and 1979. This means:

• You do not pay tax on the act of inheriting money, property, or investments.
• The estate itself is not taxed for transferring assets to you.

Do You Pay Tax on Inheritance in Australia?

While there is no direct inheritance tax, you may still face indirect taxes depending on what you do with your inheritance. Here are the common scenarios:

Selling Inherited Property or Shares

• If you inherit a house, land, or shares, you won’t be taxed until you sell them.
• When sold, Capital Gains Tax (CGT) may apply.
• The CGT cost base is usually the value at the time of the deceased’s death.

Example:

If you inherit a home worth $600,000 and later sell it for $700,000, you may owe CGT on the $100,000 gain unless the home was the deceased’s primary residence and sold within 2 years.

Tax Implications Based on Asset Types

Different types of inherited assets come with different tax consequences. Let’s explore them:

Inherited Property

• No tax when received.
• If sold later, CGT applies unless exempt (such as under main residence rules).
• CGT can be reduced by the 50% discount if held for over 12 months.

Superannuation Death Benefits

• Not all super is tax-free.
• Spouses and dependants (as per ATO definition) usually receive super benefits tax-free.
• Non-dependants (like adult children) may pay up to 17% tax on the taxable component.

Cash Inheritance

• No tax on receiving inherited cash.
• However, interest earned on that cash (if deposited in a bank) is taxable income.

Shares, Bonds, or Managed Funds

• No tax on transfer.
• CGT applies when sold.
• Dividends or distributions received later are taxable income.

Inheritance Tax Australia Calculator: Do You Need One?

Since there’s no formal inheritance tax, you don’t need a traditional “inheritance tax calculator.”

However, a capital gains tax calculator or a superannuation death benefit tax estimator might be useful in scenarios like:

• Selling inherited real estate or shares
• Receiving superannuation as a non-dependant

How Much Is Inheritance Tax in Australia?

Simple Answer:

$0. There is no inheritance tax in Australia.

But you may pay other taxes depending on how you use your inherited assets:

Inherited Asset Type	Tax on Inheritance Australia	Later Tax Event
Cash	No tax	Interest income is taxable
Property	No tax	CGT upon sale
Shares	No tax	CGT upon sale and dividends are taxable
Super (to spouse)	No tax	Possibly tax-free
Super (to non-dependant)	No tax	Up to 17% tax on taxable component

When Do You Need to Lodge a Tax Return?

You may need to include inherited income or earnings in your personal tax return if:

• You earn rent or interest from inherited assets.
• You sell inherited property or shares and generate a capital gain.
• You receive superannuation as a non-dependant.

You do not include the value of inheritance itself as income.

The executor of the estate may also need to lodge estate tax returns if the estate earned income (such as rent) before distributing assets.

Superannuation Death Benefits: Tax Trap for Adult Children

If you’re receiving a loved one’s super, it’s essential to know the ATO’s rules:

• Dependants (spouse, minor child, financially dependent) receive it tax-free.
• Non-dependants (such as an adult child) may pay up to 17% tax on the taxable component.

You’ll receive a PAYG summary from the super fund and must include it in your tax return.

Capital Gains Tax and Inheritance: What to Know

You won’t pay CGT at the time of inheritance, but:

• CGT is triggered when you sell an inherited asset.
• If the asset was acquired before 20 September 1985 (when CGT was introduced), special rules apply.
• The cost base becomes the asset’s market value at the date of death.

Common Myths About Inheritance Tax in Australia

Let’s clear up some misconceptions:

Myth	Truth
“You pay 40% tax on inheritance in Australia.”	No, there is no inheritance tax at all.
“The estate pays tax before passing assets to you.”	Not in Australia. The estate may lodge a return, but it is not taxed.
“You’ll lose half of inherited super to the ATO.”	Only if you’re a non-dependent receiving taxable components.

How to Minimize Tax on Inherited Assets

Here are some smart tips to reduce your tax liability:

• Sell inherited property within 2 years (for main residence exemption).
• Hold shares for over 12 months to qualify for the CGT discount.
• Consider a testamentary trust to split income and reduce tax.
• Seek financial advice if the inheritance is large or includes super.

FAQs: Inheritance Tax Australia

Is inheritance taxed in Australia?

No. Australia does not impose a separate inheritance tax.

Do you pay tax on inheritance Australia?

You don’t pay tax on receiving inheritance. However, CGT or income tax may apply later when you sell or earn income from the asset.

How much is inheritance tax in Australia?

Zero. But be aware of indirect taxes such as CGT or super death benefit taxes.

What about overseas inheritance?

If you’re an Australian resident receiving overseas inheritance, you may not be taxed on the asset itself but might be taxed on foreign income or capital gains if you sell it.

Conclusion

Australia does not have an inheritance tax, but that doesn’t mean it’s always tax-free. You may still owe capital gains tax, superannuation-related taxes, or income tax depending on how you use or sell your inherited assets.

If you’ve inherited recently and want to understand your tax obligations clearly, speak to a licensed tax advisor to help you make smart, compliant financial decisions.