Inheriting property, money, or other assets can significantly impact your financial situation. As an accountant, I frequently assist clients in understanding the tax consequences associated with inheritance. While receiving an inheritance is generally not taxable, there are certain aspects that can have tax implications. Here’s a guide to help you understand these nuances. 

1. Inheritance and Taxation

  • No Inheritance Tax: Australia does not have an inheritance tax. You do not pay tax simply because you inherit assets.
  • Capital Gains Tax (CGT): The main tax consideration is the Capital Gains Tax, which may apply when you sell or dispose of the inherited asset.

2. Capital Gains Tax and Inherited Property

  • Date of Acquisition: For CGT purposes, the cost base of an inherited property is usually the market value of the property at the date of the deceased’s death.
  • Exemption for Main Residence: If you inherit a property that was the main residence of the deceased, you may be exempt from CGT if the property is sold within two years of the deceased’s death.
  • Investment Properties: For inherited investment properties, CGT may apply from the date of death of the previous owner when you eventually sell the property.

3. Inheriting Money

  • Bank Accounts and Cash: Inheriting money from bank accounts or as cash does not trigger any immediate tax consequences. However, any interest earned on this money after you inherit it is taxable.

4. Inherited Shares

  • CGT on Shares: If you inherit shares, CGT may apply when you sell them. The cost base for these shares is typically the market value on the date of the deceased’s death.

5. Superannuation Benefits

  • Tax on Superannuation: Inheriting superannuation can have different tax implications, depending on whether you are a dependent of the deceased and how the super is paid out (as a lump sum or income stream).

6. Deceased Estates and Income

  • Income Earned by the Estate: If the inherited estate earns income (like rent or dividends) before it is distributed, this income may be subject to tax within the estate.

7. Seeking Professional Advice

  • Complexities: Given the complexities surrounding inheritance and taxation, it’s advisable to seek professional advice from an accountant or tax specialist. They can provide guidance tailored to your specific situation.

Inheriting assets can bring both financial benefits and tax responsibilities. Understanding the tax implications, particularly in relation to Capital Gains Tax, is crucial for making informed decisions about managing your inheritance. While there is no inheritance tax, other taxes like CGT and income tax on earnings from inherited assets can apply. Consulting with a professional can help you navigate these aspects effectively.