Death Taxes in Australia 2025: The Latest on Inheritance and Estate Tax Policy

For decades, ‘death taxes’ have been a hot-button topic in Australian finance and politics. As property prices soar and generational wealth transfer accelerates, the question of whether Australia should reintroduce inheritance or estate taxes is back in the headlines for 2025. What are death taxes, what’s changed this year, and what should Australian families be thinking about?

What Are Death Taxes and Do They Exist in Australia?

‘Death taxes’ is a catch-all term often used to describe taxes levied on the assets of a deceased person, either via an estate tax (charged on the deceased’s estate before distribution) or an inheritance tax (charged to beneficiaries). Australia once had both federal and state-based death duties, but these were abolished in the late 1970s and early 1980s. Since then, Australia has had no formal inheritance or estate tax, setting it apart from many OECD nations like the UK, US, and Japan, where such taxes remain significant revenue sources.

• Current Status (2025): There is no direct death, estate, or inheritance tax in Australia.

• Indirect Taxes: Some taxes may still apply, such as capital gains tax (CGT) on inherited assets when sold, or superannuation death benefit taxes in certain cases.

2025 Policy Update: Is Death Duty Making a Comeback?

With intergenerational wealth transfer expected to exceed $3.5 trillion by 2050, policy think tanks and political parties are re-examining the idea of death taxes. In 2025, the Productivity Commission released a much-publicised report suggesting that reintroducing a targeted inheritance tax could address wealth inequality and relieve pressure on income and consumption taxes.

• Several minor parties and advocacy groups have called for a modest estate tax—potentially only on estates valued above $5 million.

• The Federal Treasurer has stated there are “no current plans” to introduce such a tax, but has not ruled out broader tax reform discussions post-election.

• State governments, especially in NSW and Victoria, have also floated the idea as property-based revenue sources dwindle.

Despite the debate, there is still strong public resistance to the idea, particularly among older Australians. For now, no legislative changes are scheduled for 2025, but the topic remains on the national agenda as part of ongoing tax reform discussions.

What Taxes Might Apply When Someone Dies?

Even without a formal death tax, Australians inheriting wealth in 2025 should be aware of other tax obligations:

• Capital Gains Tax (CGT): If you inherit an asset (like property or shares), there’s no CGT at the time of inheritance. However, when you eventually sell the asset, CGT may apply, based on its value at the date of death.

• Superannuation Death Benefits: Lump sum super payouts to adult non-dependent beneficiaries (such as adult children) can attract up to 17% tax on the taxable component.

• Trusts and Family Companies: Income generated by inherited assets in trusts or companies will be taxed at normal rates.

It’s crucial for executors and beneficiaries to understand these rules, as mistakes can lead to avoidable tax bills or delays in estate administration.

Real-World Example: The Family Home and Inherited Property

Consider the case of the Nguyen family in Melbourne. When Mrs Nguyen passed away in 2024, she left her primary residence to her two adult children. Because the property was her main residence and not used to produce income, it qualified for the CGT main residence exemption. When the children later decided to sell, they did so within two years, ensuring no CGT was payable. However, had they rented it out or waited longer, CGT may have applied to any increase in value since the date of death.

Preparing for the Future: Estate Planning Tips for 2025

With the policy landscape in flux, Australians should stay proactive about estate planning. Key steps include:

• Keep your will up-to-date to reflect current wishes and beneficiaries.

• Understand superannuation rules and consider binding death benefit nominations.

• Document asset values at date of death for future CGT calculations.

• Discuss your plans with family and professional advisers to avoid surprises.

As the debate over death taxes continues, smart planning remains the best defence against unwanted tax shocks—and ensures your legacy is protected.