Do You Pay Inheritance Tax in Australia? And What About CGT?
- 19 hours ago
- 2 min read
This is one of the most searched tax questions in Australia.
The answer is simple, but often misunderstood.
Australia does not have inheritance tax.
However, that does not mean inherited assets are tax-free.
What Happens When You Inherit Assets
When you receive:
Property
Shares
Investments
Business interests
You generally do not pay tax at the time of inheritance.
That is where most people stop thinking about it. That is also where problems start.
Where Tax Actually Applies
Tax arises when you dispose of the inherited asset.
This is where Capital Gains Tax applies.
How CGT Works on Inherited Assets
Assets Acquired Before 20 September 1985
These are pre-CGT assets.
No CGT applied to the original owner
CGT applies when you sell
Market value at date of death is often used
Assets Acquired After 20 September 1985
You inherit the original cost base.
This means:
You inherit the purchase price and history
The full gain is calculated from that base
CGT is payable when you sell
Special Rules for Inherited Property
If you inherit a home:
You May Be Exempt If
You sell within 2 years of death
The property becomes your main residence
You May Pay Tax If
You rent the property
You hold it long-term as an investment
This is where planning becomes critical.
Common Mistakes We See
Assuming inheritance is completely tax-free
Not understanding cost-based rules
Missing exemption opportunities
Holding property without a strategy
Planning Opportunities
There are ways to reduce or manage tax:
Timing the sale of assets
Using the main residence exemption correctly
Structuring ownership between beneficiaries
Offsetting gains with losses
These decisions should be made early, not after the fact.
Why This Matters More Than Ever
With potential CGT changes being discussed in Australia:
Future gains could be taxed more heavily
Transitional rules may apply
Holding inherited assets long-term could become less tax-effective
This makes early advice even more important.
Final Word
There may be no inheritance tax in Australia, but there is still tax.
The difference between paying nothing and paying a large CGT bill comes down to planning.
If you have inherited assets or expect to, speak to us before making any decisions. We will help you understand your position and avoid costly mistakes.
