The short answer: Australia has no inheritance tax, but that doesn’t mean an inheritance arrives tax-free. The tax sits inside what you’re inheriting. Super passing to adult children usually carries a 15% tax. The family home generally doesn’t, if it’s sold within two years. Shares and property carry the original cost base forward, which means any capital gain since your parent bought them may become yours to deal with. The first thing to do is wait for probate and keep good records. The second is work out which parts of the inheritance are tax-exposed before deciding what to sell and what to keep.
No inheritance tax in Australia since 1979. But super, capital gains on non-home assets, and how the family home is handled after probate all carry real tax implications. The first sixty days is about documenting, not deciding. The financial choices that matter come in the three to twelve months after that.
For most Australians, the inheritance from a parent is the largest sum of money that’ll ever arrive in their life. It usually shows up at a rough time emotionally, which is when people tend to make the expensive mistakes. This is a plain-English walkthrough of how inheritances are actually taxed in Australia, what to do in the first two months, and the choices that shape whether it compounds your retirement or gets absorbed without impact.
What Australia Does (and Doesn’t) Tax When You Inherit
Australia abolished death duties in 1979. There’s no federal inheritance tax, no state-level estate tax, and no gift tax in the way some other countries have. If your parent leaves you $500,000 in cash, that cash arrives without tax.
The catch is that inheritance rarely arrives as plain cash. It arrives as super, shares, property, and a family home, and each of those categories has its own tax treatment. The Australian Taxation Office handles it as a transfer of ownership rather than an event that triggers a tax bill for you directly, with a few important exceptions covered below.
The general principle is this: the value of the asset when your parent passes becomes your concern going forward. You’re not taxed on receiving it. You may be taxed on what you do with it afterwards.
The First Sixty Days: What to Actually Do
The estate needs probate before any assets can be distributed, which in Queensland typically takes six to twelve weeks through the Supreme Court. Other states are similar. Until probate comes through, nothing’s officially yours, and any asset movement inside that window creates administrative complications for the executor.
What to do in the first sixty days:
- Let the executor do their job. If you’re not the executor, your role is mostly to wait and respond to their requests for documentation.
- Gather records. If you inherit shares, you need your parent’s original cost base. If you inherit the family home, you need dates: when they bought it, when it was their main residence, when it stopped being so if at all.
- Don’t quit your job, buy a car, or promise anything to anyone. Windfall reactions are normal. Most of them get walked back within a year.
- Notify Services Australia if you’re on the Age Pension or a Centrelink payment. You have 14 days from receipt of the inheritance to report it. Missing this is a common accidental overpayment.
- Talk to an accountant and a financial adviser before the lump sum lands in your account. The choice you make about super contributions, property decisions, and tax timing has a much bigger long-term effect than the headline dollar amount.
Inheriting Super: Who Pays Tax Depends on Who Receives It
Super death benefits are the most common source of unexpected tax for Australian families. The rules aren’t intuitive, and advisers sometimes see clients who’ve paid tax they could have structured around.
The tax treatment depends on two things. First, who you are relative to the deceased (a dependant or a non-dependant under tax law). Second, the components of the super balance (taxed or untaxed).
| Who Receives the Super | Tax Treatment on the Taxable Component | Tax Treatment on the Tax-Free Component |
|---|---|---|
| Spouse | Tax-free if paid as lump sum or pension | Tax-free |
| Minor child (under 18) | Tax-free if paid as lump sum | Tax-free |
| Adult child (financially dependent) | Tax-free if paid as lump sum | Tax-free |
| Adult child (not financially dependent) | 15% + 2% Medicare levy on taxable component | Tax-free |
| Non-dependant beneficiary via estate | 15% on taxable component (no Medicare levy if paid via estate) | Tax-free |
The dependency definition is strict. For tax purposes, an adult child is usually a non-dependant even if there were informal financial arrangements. If a parent had $400,000 in super (all taxable component) and leaves it to two adult children, roughly $60,000 goes to the ATO in tax before either child sees their share.
There are structuring options if this is being planned in advance. Directing super to a financial-dependent spouse first, then into an estate-planning framework, can preserve more of the balance. A binding death benefit nomination is the tool that controls this, and reviewing it every few years matters. These conversations are much better had while the parent is alive and well.
Inheriting the Family Home: The CGT Rules That Matter
The family home has a special status in the tax system, and the rules carry through to an inheritance.
If your parent’s home was their main residence for the entire period they owned it, the main residence exemption generally applies to you too, provided you sell the home within two years of the date of their death. Inside that two-year window, there’s no capital gains tax on any increase in value.
If the two-year window is missed, or if the home was rented out at any stage, the rules get more complex. The market value at the date of death becomes the cost base for the portion that wasn’t their main residence, and any increase from there to the eventual sale may be taxable. There are exceptions to the two-year rule if there’s genuine difficulty selling (disputed ownership, ongoing probate, vulnerable occupants), and the ATO has a discretionary extension process.
Pre-1985 homes are different again. The capital gains tax system didn’t exist before 20 September 1985, so homes purchased before that date are generally pre-CGT assets. When inherited, the cost base is reset to the market value at the date of death.
The practical takeaway: if you’re inheriting a home, get the valuation done on the date-of-death value before anything else. That’s the number that sets your tax position, and it’s much harder to establish in hindsight.
Inheriting Investments: When Capital Gains Apply
Shares, managed funds, and investment property come with their original cost base attached. If your parent bought CBA shares at $30 in 1995 and they’re worth $140 when you inherit them, your cost base is $30 (plus the 50% capital gains discount if you hold for twelve months). When you sell, the gain is yours to declare.
This means an inherited share portfolio has a built-in tax liability that only appears when you sell. Some families hold the shares long-term to avoid triggering it, which is fine if the underlying investments are sound. Some sell and absorb the tax to redeploy the capital into their own strategy, which is also fine if the timing is right. The wrong move is selling without knowing the cost base, because you’ll either overpay tax or end up in correspondence with the ATO later.
Investment property follows similar logic. The original purchase price, any capital improvements, and the date of acquisition all flow through to you. If the property was sometimes a rental and sometimes a main residence, the calculation gets technical and an accountant is worth the fee.
Should You Put Some Into Super?
For a lot of Australians inheriting $100,000 to $500,000 in their fifties or sixties, the right home for a meaningful chunk is their own super. It’s tax-effective, grows in a protected wrapper, and can be converted to tax-free income in retirement.
The contribution levers:
- Non-concessional contributions are capped at $120,000 a year (2025-26 rate), with a three-year bring-forward up to $360,000 if under 75 and under the total super balance threshold.
- Concessional contributions are capped at $30,000 a year, tax-deductible against your income. Catch-up contributions are available for anyone with a super balance under $500,000 who hasn’t used prior years’ caps.
- Downsizer contributions. If you’re over 55 and you’re selling a home you’ve owned for more than ten years, you can put up to $300,000 each into super outside the normal caps. Some inherited-home sales qualify, but the rules around whether an inherited home can anchor a downsizer contribution are narrow and require careful reading.
The tax-effectiveness of super makes it the default destination for a chunk of most inheritances. The exception is when an inheritance arrives close enough to retirement that the preservation rules restrict access. That’s a timing conversation worth having with an adviser before acting.
How an Inheritance Affects the Age Pension
If you’re already on the Age Pension when an inheritance arrives, your asset and income position changes. Services Australia has to be notified within 14 days. Your pension rate will be recalculated based on the new position.
The biggest impact comes from assets that sit outside super. Cash, shares, and investment properties count toward the assets test. The assets test for a single home-owning pensioner starts tapering at around $321,500 and cuts out entirely at around $714,500 (2026 indexed values). A $200,000 inheritance can push someone off the part-pension and onto self-funded status overnight.
Two levers help. If you’re over 55 and eligible, putting part of the inheritance into super (which isn’t assessed for the pension until you start drawing from it, and then only as income) preserves pension entitlement longer. Structured spending (paying down a mortgage, funding home improvements that don’t add to assessable assets, prepaying funeral bonds up to the legal threshold) can also smooth the transition.
The worst outcome is receiving an inheritance and letting the pension reduction eat most of its long-term value because the timing wasn’t thought through.
The Mistakes People Make
Spending too much in the first year is the most common. The ATO and behavioural research both show that windfall money tends to get consumed faster than earned money. Cars, holidays, renovations that don’t pay back. Setting a rule of “no big commitments for twelve months” protects against most of it.
Not documenting gifts to family is another. If you share part of an inheritance with siblings, children, or extended family without documentation, it can create Centrelink deprivation issues and family tension down the line. A simple letter of gift (or loan, if it’s meant to be repaid) handles it.
Selling inherited shares without working out the cost base is the third. The ATO accepts the parent’s original cost base if documented, but absence of records means the ATO can default to zero, which is expensive. Dig for statements, check share registries, do the work before the sale.
The fourth is ignoring the super piece. Some beneficiaries assume the super just flows to the estate and gets divided like any other asset. It usually flows via a binding nomination directly to the nominated recipient, which can bypass the will entirely. Understanding this before the event is more valuable than reacting to it afterwards.
How Financial Advice Fits In
The highest-value financial advice engagement around an inheritance is usually in the first three to six months after probate. That’s when the structure of what you do with the money gets locked in. After that, the flexibility narrows.
A one-off engagement typically covers the tax-efficient structure (super vs outside super, timing of asset sales, use of CGT discounts), the Age Pension implications if relevant, estate planning updates on your end (because your will probably needs a refresh too), and the longer-term question of whether the inheritance changes your retirement date.
Because we work with a lot of families across the retirement-to-aged-care-to-inheritance arc, we’re often already across the family’s full position when a parent passes. The conversation doesn’t start from zero. The fee for this kind of engagement is typically $3,500 to $5,500 depending on complexity, and the tax savings alone usually cover it several times over.
The Bottom Line
An inheritance in Australia isn’t taxed on arrival. But the underlying components carry embedded tax consequences that shape what the inheritance’s real value turns out to be. Adult children inheriting super pay 15% tax. Family homes need to sell within two years to keep the main residence exemption clean. Shares and investment property bring their original cost bases forward. Age Pensioners need to notify Centrelink and model the impact before assets move.
The decisions that matter come in the first twelve months. Getting them right can mean the difference between a one-time bump and a retirement-changing result. Getting them wrong usually means paying tax that was avoidable and finding the Pension entitlement has quietly disappeared.
Common Questions
Is an inheritance taxable income in Australia?
The inheritance itself isn’t. Australia doesn’t have an inheritance tax. But the assets you receive can carry embedded tax events. Super paid to a non-dependant child typically attracts 15% tax on the taxable component. Inherited shares and investment property carry their original cost base forward, so any capital gain when you sell may be taxable. The family home is usually exempt if sold within two years of the date of death.
My parent left me their super. Why am I paying tax on it?
Because as an adult child who wasn’t financially dependent on your parent, you’re a non-dependant for tax purposes. Super passing to a non-dependant is taxed at 15% on the taxable component (plus 2% Medicare levy if paid direct, or no Medicare levy if paid through the estate). The tax-free component passes tax-free. This is why super is often described as having a ‘death tax’ when it goes to adult children, even though Australia officially has no inheritance tax.
How long do I have to sell my parent’s home before capital gains tax kicks in?
Two years from the date of death, if the home was their main residence for the full time they owned it. Sell within that window and the main residence exemption flows through, so there’s usually no CGT. Miss the window and the property may become partly or fully subject to CGT based on the value increase from the date of death onward. The ATO has a discretionary extension process for genuine hardship cases. Get a professional valuation of the property as at the date of death. That’s the number that sets your cost base if CGT does end up applying.
Can I put my inheritance into super?
Yes, subject to the usual contribution caps. You can make up to $120,000 a year in non-concessional contributions (2025-26 rate), or bring forward three years to contribute up to $360,000 in one year if you’re under 75 and under the total super balance threshold. If you’re over 55 and selling a qualifying home, the downsizer contribution lets you put up to $300,000 each into super outside the normal caps. For larger inheritances, staging contributions across multiple financial years is usually the tax-efficient path.
Does inheritance affect the Age Pension?
Yes, and you have 14 days from receipt to notify Services Australia. The inheritance changes your asset position and, for anything that generates income, your income position too. Most pensioners see a reduction in their part-pension, and some lose it altogether. There are ways to manage the impact: contributing eligible amounts to super (not assessed until drawdown), paying down a mortgage, or prepaying funeral bonds up to the legal cap. The right approach depends on your age, your partner’s position, and your longer-term plans.
General Advice Warning: This article contains general information only and does not take into account your individual objectives, financial situation, or needs. Tax and social security rules cited are current as at 2026 and may change. Before making any financial decisions, you should consider whether the information is appropriate for your circumstances and seek personal financial advice from a licensed adviser and tax advice from a qualified accountant. Great Advice Financial Advisers is a Corporate Authorised Representative of Akumin Financial Planning Pty Ltd (AFSL 232706).
