If you've inherited money or assets — or you're planning what to leave behind — one question comes up first: will the tax office take a cut? In Australia the answer is reassuring, but it isn't a flat "no". There's no inheritance tax, yet a few other taxes can still apply along the way. This guide explains exactly what does and doesn't get taxed when wealth changes hands.
The short answer
Australia has no inheritance tax. There is no estate tax, no death duty and no gift tax anywhere in the country — not at the federal level, and not in any state or territory. When someone dies, their beneficiaries are not charged a tax simply for receiving an inheritance, and the estate is not billed a percentage of its total value the way it would be in the United Kingdom or the United States.
Receiving an inheritance is also not treated as income. If you inherit $200,000 in cash, you don't declare it on your tax return and you don't pay income tax on it. The same goes for inherited belongings, a house you move into, or shares transferred into your name. The transfer itself is tax-free.
A quick bit of history
Australia did once tax inheritances — they were called death duties or estate duty. The unwinding began in Queensland, which abolished its state death duties in 1977. That triggered a wave of retirees relocating across the border, and the other states quickly followed to stay competitive. The Commonwealth abolished federal estate duty from 1 July 1979, and the last state death duties were gone by the early 1980s. Australia has been free of inheritance tax ever since, and there is no current proposal to bring it back.
What can still be taxed
While there's no tax on the inheritance itself, three things can still create a tax bill — usually for the person who inherits, sometimes for the estate:
- Capital gains tax when you eventually sell an inherited asset, such as shares or property.
- Tax on inherited superannuation, depending on who receives the death benefit.
- Income tax on the estate for money the estate earns after the death, while it's being wound up.
Each one is worth understanding, because the amounts involved can be significant — and they catch a lot of families by surprise.
Capital gains tax on inherited assets
This is the big one. You do not pay capital gains tax (CGT) when an asset passes to you — inheriting shares or a property is not a CGT event. The tax question is simply deferred to the day you eventually sell.
When you do sell, your capital gain is worked out using a cost base you inherit from the deceased — not necessarily the value on the day they died. How that cost base is set depends on when the deceased originally acquired the asset:
- Assets bought on or after 20 September 1985 (a "post-CGT" asset): you inherit the deceased's original cost base. The entire gain built up over their years of ownership — plus any further growth while you hold it — becomes taxable when you sell.
- Assets bought before 20 September 1985 (a "pre-CGT" asset): you're treated as acquiring it at its market value on the date of death. Only growth after the death is taxed.
Because the embedded gain on a long-held post-CGT asset can be large, selling an inherited share parcel or investment property can produce a sizeable CGT bill — even though the inheritance itself was completely tax-free.
The 50% CGT discount still applies
If you hold the asset for more than 12 months before selling, the 50% CGT discount generally applies, halving the taxable gain. For inherited assets, the time the deceased owned the asset counts towards that 12-month test — so in most cases you qualify for the discount straight away.
Inherited property and the main residence exemption
Inherited property gets special treatment. If you sell a dwelling you inherited within two years of the person's death, the sale is generally fully exempt from CGT — provided the property was the deceased's main residence and not being used to produce income just before they died (or they had owned it since before 20 September 1985).
Miss that two-year window and CGT can apply to the gain. The ATO can extend the two years in some situations — for example where the estate was complex, or the sale was delayed by a challenge to the will — but the extension isn't automatic. If you're inheriting a home you don't intend to keep, the two-year rule is well worth planning around.
Tax on inherited superannuation
Superannuation usually sits outside a person's will, and it has its own tax rules when it's paid out as a death benefit. What matters most is who receives it:
- A death benefits dependant — typically a spouse or de facto partner, a child under 18, or someone who was financially dependent on the deceased — receives the super death benefit tax-free.
- A non-dependant — most commonly a financially independent adult child — pays tax on the "taxable component" of the benefit. The taxed element is taxed at 15% plus the 2% Medicare levy (17% in total), and any untaxed element at 30% plus Medicare (32%). The tax-free component is always tax-free.
This is the closest thing Australia has to an inheritance tax — and it surprises many families, because adult children are the most common beneficiaries. With planning, the impact can sometimes be reduced, which is a common reason people seek financial advice when updating their estate plans.
Does the estate itself pay tax?
When someone dies, their assets are held by their deceased estate — managed by an executor — until everything is distributed. If the estate earns income during that period, such as interest, dividends or rent, the executor may need to lodge a tax return for the estate and pay tax on that income. This is income tax on the estate's earnings, not a tax on the inheritance, and it usually applies only to the months between the death and the final distribution.
What's changing from 1 July 2027
The May 2026 federal budget announced that the 50% CGT discount will be replaced for assets sold on or after 1 July 2027. In its place, a cost-base indexation system and a 30% minimum tax rate on capital gains have been proposed. If you inherit an asset and sell it after that date, the new rules — not the 50% discount — would apply to your gain.
A worked example
Priya inherits a parcel of shares from her mother. Her mother bought them in 2010 for $20,000 (a post-CGT asset). When her mother dies in 2026, the shares are worth $52,000 — but no CGT is triggered by the inheritance. Priya inherits her mother's original cost base of $20,000. In the 2026–27 year she sells the shares for $58,000:
Priya pays no tax to receive the shares — but the $19,000 taxable gain is added to her income for the year and taxed at her marginal rate. Had she sold the inherited family home instead, and done so within two years of the death, the sale could have been fully CGT-free.
The bottom line
Australia has no inheritance tax, no estate tax and no gift tax — receiving an inheritance won't cost you a cent in tax by itself. The tax to watch for comes later: capital gains tax when you sell an inherited asset, and tax on inherited super paid to a non-dependant. Knowing which of these applies — and using the capital gains tax calculator before you sell — is the difference between a nasty surprise and a planned-for outcome.