Does Australia have a “death tax” like some other countries? The term “death tax” is used to describe various taxes and duties associated with inheritance asset transfer after someone’s passing. However, it’s important to note that Australia does not have a specific tax called a “death tax” like some other countries do. Originally published on https://taxly.ai/tax-guides/death-tax-australia/

1. What is Death Tax Australia?
Does Australia have a “death tax” like some other
countries? The term “death tax” is used to describe
various taxes and duties associated with inheritance
asset transfer after someone’s passing. However,
it’s important to note that Australia does not have a
specific tax called a “death tax” like some other
countries do.
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2. Death Tax Australia Basics
Inheritance Does Not Trigger Taxes in Australia
In Australia, there is no specific federal inheritance or death tax. Most
states and territories abolished these taxes in the 1970s. This means
that inheriting assets itself does not trigger a direct tax liability.
Capital Gains Tax is Applicable on Selling Inherited Assets
While there is no inheritance tax, CGT can come into play when you sell
inherited assets, such as real estate or investments. The key point to
remember is that CGT is typically calculated based on the increase in the
asset’s value from the time of acquisition by the deceased person to the
time of sale.
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3. Your Family Home Is Exempt from CGT:
One significant exception to CGT is the family home. If you inherit a
family home and meet certain criteria, you may be eligible for a full or
partial exemption from CGT when you sell the property. This exemption
aims to preserve the family home for beneficiaries.
Income Tax is Applicable on Income from Inherited
Assets:
If you inherit income-producing assets like rental properties or
investments, the income generated may be subject to income tax
at your applicable tax rate.
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4. Superannuation (Super) Death Tax Benefits:
If you receive superannuation as a death benefit, whether it’s paid as a
lump sum or income stream can have different tax implications. Your age
and your relationship to the deceased person are key factors that
influence the tax treatment.
Taxable and Tax-Free Components of Superannuation Death
Benefits:
When a person passes away and their superannuation fund pays out benefits to their
beneficiaries, these benefits can be categorizedinto taxable and tax-free
components. Understanding these components and their tax treatment is
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5. Tax-Free Component:
The tax-free component of a superannuation death benefit is
comprised of contributions that have already been taxed. These
contributions can include:
Non-Concessional Contributions:
These are after-tax contributions made by an individual from their
own income or savings. Non-concessional contributions are not
subject to tax when they are paid out as part of a superannuation
death benefit.
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6. Government Co-contributions:
If the deceased person received government co-
contributions in their super fund, this portion is typically
tax-free for beneficiaries.
Certain Personal Contributions:
Personal contributions made by the deceased person that
were not claimed as a tax deduction are usually included
in the tax-free component.
Withdrawals After Preservation Age:
Any withdrawals made by the deceased person from their
superannuation fund after reaching the preservation age
are often part of the tax-free component.
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7. Taxable Component:
The taxable component includes contributions that
have not yet been taxed. These contributions can
encompass:
Employer Contributions:
This refers to the compulsory superannuation
contributions made by employers on behalf of their
employees. These contributions are typically
included in the taxable component.
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8. Death Tax Based on Beneficiary’s Circumstances:
The tax treatment of the taxable component varies depending on
the beneficiary’s specific circumstances:
Age of the Beneficiary:
The age of the beneficiary, when they receive the superannuation
death benefit, can impact the tax rate applied to the taxable
component. Younger beneficiaries may enjoy lower tax rates.
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9. In a Nutshell
Although “death tax Australia” is not a common term,
certain tax duties apply to individuals who get
inheritance after someone’s passing. It essential for
Australians to be aware of the potential tax
implications when inheriting assets. CGT is one of the
most common types of tax applicable to selling
inherited assets. Similarly, income from inherited
assets is also subject to tax.
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Data Security Tax Filing Statements
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