Do you pay tax on inheritance in Australia?

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Do you need to report income from a deceased estate?

If you receive income from a deceased estate before it’s fully settled, such as rental income or earnings from investments, this must be reported in your tax return. This income is considered assessable and should be declared for the tax year in which you receive it.

The Legal Personal Representative (LPR) of the estate will provide you with details about the income. It’s your responsibility to ensure this information is accurately included in your tax return to meet your tax obligations.

Do you pay tax on superannuation death benefits?

Superannuation death benefits may be subject to tax, depending on your relationship with the deceased and other factors. If you’re a tax-dependent, such as a spouse, child under 18, or someone financially dependent on the deceased, you can receive the superannuation death benefit tax-free, whether it’s paid as a lump sum or an income stream.

For beneficiaries who aren’t tax-dependent, the taxable component of the super death benefit may be subject to tax. The tax implications can differ depending on whether the benefit is paid as a lump sum or as an ongoing income stream.

The age of both the deceased and the beneficiary may also influence how income streams from the superannuation fund are taxed. It is important to consult with the trustee of the deceased’s superannuation fund to understand the tax implications and ensure you meet all tax obligations under Australian law.

Do you pay Capital Gains Tax on inherited properties?

You may need to pay Capital Gains Tax (CGT) on inherited properties, but only when you sell or dispose of the property. The obligation to pay CGT does not arise when you inherit the asset but rather when you make a profit from its sale.

The amount of CGT depends on several factors:

• The cost base, which is typically the market value of the property when the deceased acquired it.

• The price at which you sell the property.

• The length of time the deceased held the asset before you inherited it.

When the inherited property is sold, CGT is calculated based on any capital gain made from the sale.

Do you pay income tax on inherited assets?

When you inherit assets like shares, any dividends received must be reported as assessable income on your tax return, even if you reinvest them to buy more shares. If the dividends are franked, you may be eligible for franking credits, which can reduce your overall tax liability. Additionally, if you decide to sell the inherited shares, you’ll need to report any profit or loss for Capital Gains Tax (CGT) purposes.

For rental income from an inherited property, all rental payments are considered assessable income and must be declared on your tax return, including income from overseas properties. If you jointly own the property, you’re responsible for reporting your portion of both the rental income and related expenses. Any capital gain or loss when selling the property must also be reported, and CGT will apply based on the market value at the time of sale.

Are there special tax rules for non-resident beneficiaries?

Yes, non-resident beneficiaries may encounter additional tax obligations when inheriting assets from an Australian estate. If you’re living outside Australia, you may be subject to higher Capital Gains Tax (CGT) rates, particularly when selling inherited property. Non-residents often miss out on tax concessions that are available to Australian residents, which can result in a larger tax liability on any capital gains.

Additionally, non-residents may face higher tax rates on any income derived from inherited assets, such as rental income or dividends. It’s important to be aware of these tax implications and seek professional advice to ensure compliance with Australian tax laws and avoid unexpected liabilities.

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This outline is for general information only and not as legal, tax or accounting advice. It may not be accurate, complete or current. It is not official and not from a government institution. Always consult a qualified professional for specific advice tailored to your unique circumstances.