Inheritance Tax in Australia
What is an Inheritance Tax?
Inheritance tax used to be known commonly as death duties and referred to the range of taxes that were payable by the ‘beneficiary’ of a Will.
Do You Have to Pay Taxes on Inheritance?
In 1979 the Queensland government abolished all death duties. Other states in Australia soon followed and ever since, there have been no inheritance tax obligations. You will not pay tax if you inherit cash, shares, property or gifts unless you are advised by the executor. It is the responsibility of the executor to finalise any tax obligations from the deceased estate prior to administering the estate and distributing assets.
If you are a beneficiary to an estate and you have concerns about how the executor is administering the Will, you can read more here.
What Taxes Do I have to Pay?
As a beneficiary of assets from a Will, you need to be aware of how those assets affect your normal tax obligations.
Below are examples of when you might have to pay tax on assets you have inherited:
- If you inherit a property and that property earns you an income from rent, then that income will be taxable.
- If you inherit a property and that property earns you an income from rent, then you may be liable for capital gains tax if you sell the property in future.
- If you inherit a death benefit from a superannuation account, you may have to pay tax if you're not a tax dependant of the deceased.
You are a tax dependant if you fit the following criteria:
- a spouse or de facto spouse of the deceased.
- a former spouse or de facto spouse of the deceased.
- a child of the deceased.
- a person financially dependent on the deceased.
- a person in an interdependent relationship with the deceased.
If you are the beneficiary of a Will and you would like to make sure the taxman doesn't get more than he's entitled to, click here and Get In Touch with one of our lawyers. Your initial consultation is free of charge.
How to Minimise the Tax You Pay as a Beneficiary of a Will?
Prevention is always better than a cure. It is prudent to seek the advice of a Will and Estate Lawyer who can assist you with making appropriate plans for your estate that help to reduce the tax burden on yourself as well as your beneficiaries.
As a beneficiary of a Will you don't have much control over whether the deceased sought estate planning advice. If you are looking for ways to minimise your tax obligations, there are many factors to consider when you inherit benefits from an estate. This is especially so when the estate involves a large amount of money with diverse assets. You will need to take into account the following:
- The type of asset you inherit - shares, cash, property and gifts.
- The amount or value of each asset.
- How the asset is paid - as a lump sum or regular payments.
- Your current financial situation - whether you are an employee or a business owner, whether you use a trust or not.
- Your current financial status - your income and how it is earned.
There is no one solution or piece of advice that can be recommended across the board. It is for this reason that I suggest you seek the expert advice of a Will and Estate Lawyer.
Below are some simple solutions to a common situation where you might have inherited a property:
- You may decide to sell the property within two years of the death of the deceased which will allow you to avoid paying Capital Gains Tax.
- If you are a tax dependant of the deceased and decide to use the property as your main residence you will not be liable to pay Capital Gains Tax on the sale of the property.
If you are a beneficiary to a Will and you would like to know what happens when someone dies, you can read more here.