Unlimited Marital Deduction: Estate Planning for Australian Couples in 2026

The term "unlimited marital deduction" is often used in countries with estate taxes, but in Australia, the concept is reflected in the way assets can be transferred between spouses without triggering immediate tax liabilities. This is most relevant for CGT and superannuation, which are key components of many Australians’ estates.

Key Features

• No immediate tax on inter-spousal transfers: When assets are transferred to a spouse, either during life or through a will, there is generally no immediate CGT liability. The cost base and holding period of the asset are preserved for the receiving spouse.

• Applies to legally married couples: These rules apply to all legally married couples, including same-sex marriages.

• Deferral, not elimination: While tax is deferred at the time of transfer, it may still apply when the surviving spouse later sells the asset or passes it on to others.

• Superannuation benefits: Superannuation death benefits paid to a spouse are generally tax-free, providing further support for the surviving partner.

Australian tax policy continues to support inter-spousal transfers in 2026. Here’s how the main rules apply:

Capital Gains Tax (CGT) Rollover Relief

When an asset such as property or shares is transferred to a spouse, the receiving spouse takes on the original cost base and acquisition date. No CGT is payable at the time of transfer. If the surviving spouse later sells the asset, CGT may apply based on the original cost base.

Superannuation Death Benefits

Superannuation is a major asset for many Australians. When a superannuation member dies, their balance can usually be paid to their spouse tax-free, either as a lump sum or as an income stream, depending on the fund’s rules and the deceased’s wishes.

Main Residence Exemption

The family home is often the most valuable asset in an estate. The main residence exemption means that, in most cases, a home passed to a spouse is not subject to CGT. If the spouse continues to use the property as their main residence, this exemption can continue.

While these rules provide significant advantages, it’s important to plan carefully. Here are some strategies to consider:

Use of Testamentary Trusts

A testamentary trust is a trust established by a will. It can provide income and asset protection for the surviving spouse and future generations. Testamentary trusts can also offer flexibility in distributing assets and may help manage tax outcomes for beneficiaries.

Regular Review of Superannuation Nominations

Superannuation does not automatically form part of your estate. It’s important to keep your beneficiary nominations up to date to ensure your superannuation is paid according to your wishes and in the most tax-effective way.

Lifetime Gifts and Transfers

Couples may choose to transfer assets during their lifetime to take advantage of CGT rollover provisions. This can help manage future tax liabilities and provide clarity about asset ownership.

Consider Family Dynamics

Blended families, stepchildren, and former spouses can complicate estate planning. In Australia, family members may have the right to contest a will under certain circumstances. Clear documentation and legal advice are essential to ensure your intentions are carried out.

Passing on the Family Home

If one spouse passes away and leaves the family home to the other, the main residence exemption usually means there is no CGT payable. The surviving spouse can continue to live in the home or sell it without immediate tax consequences, provided the property remains their main residence.

Investment Properties and CGT

When investment properties are transferred to a spouse, the CGT liability is deferred. The surviving spouse inherits the original cost base. If they later sell the property, CGT will be calculated based on the original purchase price and date.

Superannuation and Estate Planning

Superannuation balances can be significant. If paid to a spouse, these benefits are generally tax-free. Couples can also consider testamentary trusts to manage superannuation death benefits, providing both security and flexibility for the surviving spouse and children.

Life circumstances change, and so do tax laws. It’s important to review your estate plan regularly, especially after major life events such as marriage, divorce, or the birth of a child. Regular reviews help ensure your plan remains effective and reflects your current wishes.

• Review your will and estate plan regularly.
• Check and update superannuation beneficiary nominations.
• Consider establishing a testamentary trust for added flexibility and protection.
• Seek professional advice to navigate complex situations or family dynamics.
• Document your wishes clearly to help prevent disputes.

What happens to my assets if I leave everything to my spouse?

In most cases, assets can be transferred to your spouse without immediate tax consequences. However, future tax may apply if your spouse later sells certain assets.

Is there an estate or inheritance tax in Australia?

No, Australia does not have a federal estate or inheritance tax. However, capital gains tax and superannuation rules can affect how assets are taxed when passed on.

Are superannuation death benefits always tax-free for spouses?

Generally, superannuation death benefits paid to a spouse are tax-free, but it’s important to check your fund’s rules and keep your nominations up to date.

Do blended families need special estate planning?

Yes. Blended families can face challenges if wills are contested or if there are competing claims. Careful planning and legal advice are recommended.

By understanding the rules around inter-spousal transfers and regularly reviewing your estate plan, you can help ensure your family’s financial security and peace of mind.