Distribution In Kind Explained: 2025 Guide for Australian Investors & Estates

As Australians seek smarter ways to manage wealth transfers—whether from a deceased estate, a family trust, or a superannuation fund—the concept of distribution in kind is gaining attention. Unlike cash payouts, this method delivers assets in their existing form. But what does this mean for your finances, and what’s changed in 2025?

What Is Distribution In Kind?

Distribution in kind (also called in specie distribution) is when assets are transferred directly to beneficiaries without converting them to cash. Instead of selling shares, property, or collectibles and distributing the proceeds, the actual asset is handed over. This approach is common in:

• Deceased estates: Heirs receive direct ownership of assets like shares or real estate.

• Family trusts: Beneficiaries get assets the trust holds, rather than a cash equivalent.

• Superannuation funds: Members (or their estates) receive assets held in their super, such as listed shares or managed funds.

In 2025, more Australians are encountering in-kind distributions due to tightened cash liquidity rules for trusts and updated estate planning strategies aiming to minimise tax leakage and preserve asset value.

Why Distribution In Kind Matters in 2025

The past year has seen notable policy updates:

• ATO guidance on CGT: The Australian Taxation Office has clarified that in-kind distributions from trusts or estates can trigger capital gains tax (CGT) events, based on the asset’s market value at transfer—even if no cash changes hands.

• Superannuation law tweaks: From July 2025, SMSFs can more readily make in-specie transfers of listed assets to members, helping retirees manage portfolio diversification without forced sales.

• Estate planning popularity: With property and share markets volatile, lawyers and financial advisers are increasingly recommending in-kind distributions to avoid unnecessary transaction costs and delays.

For example, if a family trust holds $2 million in ASX-listed shares and one beneficiary wants their share in cash, but the other prefers the shares, an in-kind distribution allows the assets to be split without triggering a large sale—and potential CGT—on the entire holding.

Tax Implications and Practical Considerations

While in-kind distributions may avoid some transaction costs, they come with their own tax and administrative considerations:

• CGT liability: The trust, estate, or super fund may incur CGT on the unrealised gain of the asset at the time of transfer. Beneficiaries inherit the asset at market value for their own future CGT calculations.

• Stamp duty: Transferring real property or certain non-cash assets can attract stamp duty in some states. For instance, transferring an investment property in Victoria as an in-kind distribution to a beneficiary may trigger duty at market rates.

• Record keeping: Accurate documentation is essential. Beneficiaries need records of the asset’s market value and acquisition date for future tax events.

• Liquidity needs: If the recipient requires cash, they may still need to sell the asset themselves—potentially at an inopportune time.

In 2025, digital platforms used by major super funds and estate lawyers are streamlining the paperwork and valuation process, but it remains crucial to seek precise valuations to avoid ATO scrutiny.

Real-World Examples: How Australians Are Using In-Kind Distributions

• SMSF retirees: John and Lisa, both 65, decide to wind up their self-managed super fund. Instead of liquidating their entire portfolio, they take delivery of ASX shares and an ETF in-kind, saving brokerage costs and avoiding selling in a down market.

• Family trusts: A Melbourne-based family trust with a vintage car collection distributes a classic Holden to each of two children as part of their inheritance. Each vehicle is valued at transfer, with CGT calculated accordingly.

• Estate settlements: When a Sydney property owner passes away, her three children receive the three units she owned, each getting direct title to one. This avoids forced sales and preserves each property’s unique investment potential.

Should You Opt for Distribution In Kind?

Distribution in kind can be a smart strategy when:

• Beneficiaries want to keep the asset for the long term

• Market conditions make asset sales unattractive

• There’s a desire to minimise immediate tax liabilities or transaction costs

However, it’s not for everyone. If liquidity is needed, or if asset values are highly uncertain, a cash distribution might be simpler.