Inheritance tax in Australia no longer exists, allowing heirs, including expats and non-residents, to inherit assets without paying a direct tax.
While the absence of IHT reduces the burden on heirs, certain related taxes, such as capital gains tax (CGT) or income tax, may apply depending on the type of asset inherited.
Este artículo trata:
- Why is there no inheritance tax in Australia?
- Do I need to pay tax on an inheritance in Australia?
- What are the rules of inheritance in Australia?
Principales conclusiones:
- Australia has no formal inheritance tax.
- Capital gains or income tax may apply on inherited assets when sold.
- Gifting thresholds and timing can impact taxation.
- Expats and non-residents should plan carefully to avoid unexpected taxes.
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La información contenida en este artículo es meramente orientativa. No constituye asesoramiento financiero, jurídico o fiscal, ni una recomendación o solicitud de inversión. Algunos hechos pueden haber cambiado desde el momento de su redacción.
How much can you inherit tax-free in Australia?
There is no maximum limit for tax-free inheritance in Australia because inheritance itself is not taxed.
Beneficiaries receive assets like cash, property, shares, or superannuation without paying a direct IHT.
However, taxes may apply when the inherited asset is sold or generates income:
- Property: Capital gains tax may be applied on investment properties if the market value at sale exceeds the cost base.
- Superannuation: Certain superannuation payouts to non-dependents may be taxed.
- Investments: Dividends, interest, or distributions may be subject to income tax.
What are the rules of inheritance in Australia?
In Australia, inherited assets pass either under a valid will or through state intestacy laws, with spouses and children prioritized and courts able to override a will via family provision claims.
- Wills: Individuals may distribute assets according to their wishes, provided the will is legally valid.
- Intestate succession: If no valid will exists, state and territory laws determine distribution, typically favoring spouses and children.
- Family provision claims: Eligible relatives or dependents can challenge a will if adequate provision has not been made.
- Foreign heirs: Non-residents may inherit Australian assets, although tax treatment can vary by asset type and jurisdiction.
What is the 3-year rule for deceased estate?
In New South Wales, the 3-year rule affects capital gains tax (CGT) on property inherited from a deceased estate.
If the property is sold within three years of the date of death, the estate may be exempt from CGT, provided it meets certain legal conditions.
The exemption mainly applies to the family home or other real estate that was part of the deceased estate. This rule helps beneficiaries avoid potentially large CGT liabilities if the property is sold shortly after death.
After the three-year period, or if the property is retained longer, normal CGT rules apply based on the market value at the date of death.
This rule is state-specific (NSW) and primarily impacts property within deceased estates. Other states may have different CGT exemptions or rules.
Can I put inheritance into superannuation in Australia?
Yes, you can contribute inherited money to superannuation in Australia, but it is treated as a personal contribution, not a special inheritance contribution.
This means normal superannuation contribution rules and caps apply.
If you contribute the inheritance as a non-concessional contribution, it will count toward the annual non-concessional cap, provided you meet age and eligibility requirements.
You may also be able to use the bring-forward rule to contribute a larger amount over a shorter period, depending on your total super balance.
If you want to claim a tax deduction for the contribution, it must be made as a concessional contribution and will count toward the concessional cap.
For expats and non-residents, additional restrictions may apply, particularly if you are no longer an Australian tax resident or your super fund limits contributions from overseas.
Given the complexity, professional advice is recommended before contributing inherited funds to superannuation.
What to do with inheritance money to avoid taxes in Australia
To avoid unnecessary taxes in Australia, inheritance money should be managed in a way that limits capital gains tax and future income tax rather than inheritance tax, which does not exist.
- Invest in tax-advantaged structures such as superannuation, subject to contribution caps and eligibility rules.
- Time the sale of inherited property carefully to manage or reduce capital gains tax exposure.
- Keep clear records of the asset’s market value at the date of death, as this becomes the CGT cost base.
- Gift funds strategically to family members, considering income tax outcomes and social security implications rather than gift tax.
How much money can you gift a family member without being taxed in Australia?
Australia does not have a formal gift tax, but gifts may have indirect tax consequences.
- Cash gifts: No tax on the gift itself, regardless of the amount.
- Assets: CGT may apply if the gifted asset is sold later.
- Superannuation contributions: Must follow contribution caps to avoid extra tax.
How Asset Ownership Structure Affects CGT in Deceased Estates
Asset ownership structure plays a major role in determining whether capital gains tax (CGT) applies, how much is payable, and whether exemptions, such as the 3-year rule, can be fully used in Australia.
Individually Owned Property
Individually owned property is usually the most straightforward.
- If the deceased owned the property personally, the beneficiary generally inherits it at the market value on the date of death, which becomes the new CGT cost base.
- The 3-year exemption can often be used effectively.
- Former main residences may qualify for full CGT relief if timing conditions are met.
Jointly Owned Property
Joint ownership is treated differently.
- Under joint tenancy, the deceased’s interest does not form part of the estate and automatically passes to the surviving joint tenant by right of survivorship.
- For CGT purposes, however, the surviving owner is taken to acquire the deceased’s share at market value on the date of death, while retaining their original cost base for their own share.
- When the property is later sold, CGT may apply to part or all of the gain depending on use, ownership period, and eligibility for any main-residence exemption.
Property Held in Trusts
Trust-held property usually falls outside standard deceased-estate concessions.
- Most trusts do not benefit from the 3-year rule, and beneficiaries typically inherit an interest in the trust rather than the underlying asset.
- As a result, deceased-estate CGT exemptions and timing concessions do not apply, even though the trust may still access the standard 50% CGT discount if the asset has been held for more than 12 months.
Company-Owned Property
Company ownership is typically the least tax-efficient on death.
- Shares in the company are inherited rather than the property itself, meaning CGT is assessed at the shareholder level when those shares are sold.
- Main-residence exemptions and deceased-estate concessions usually do not apply.
Foreign Beneficiaries
For non-resident heirs, ownership structure is even more critical.
- Non-residents may lose access to certain CGT exemptions on Australian real estate
- Timing rules alone may not eliminate tax if residency conditions are not met.
Ultimately, the way assets are held before death often has a greater impact on CGT outcomes than the inheritance itself.
Proper structuring, well in advance, can preserve exemptions, reduce future tax, and prevent unexpected liabilities for heirs.
Conclusión
Australia’s absence of a formal inheritance tax makes it one of the simplest countries for passing assets to heirs, including expats and non-residents.
While receiving an inheritance itself is tax-free, careful planning is still needed to manage capital gains, income tax, and superannuation contributions.
Keeping accurate records, understanding gifting rules, and seeking professional guidance can help beneficiaries make the most of their inheritance while minimizing future tax obligations.
Preguntas frecuentes
Why was inheritance tax abolished in Australia?
Australia abolished inheritance tax (death duties) by 1979, after all states repealed state-level death duties.
The taxes were widely viewed as complex, inefficient, and unfair to families, particularly those inheriting businesses or farms.
What happens if you gift more than $10,000 in Australia?
Gifting cash has no direct tax, even above $10,000, but it may impact social security, superannuation, or CGT obligations if assets are involved.
Is inheritance tax double taxation?
Since Australia has no inheritance tax, double taxation is generally not an issue, though CGT or income tax may still apply on certain assets after inheritance.
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