Estate Tax Australia 2025: Policy Updates & Estate Planning Guide

With an unprecedented intergenerational wealth transfer underway, the question of estate tax in Australia is once again making headlines. While Australia does not currently have a formal estate or inheritance tax, ongoing debates, changing policy attitudes, and increasing asset values mean it’s crucial to understand the tax landscape and how it could affect your legacy planning in 2025.

Australia’s Estate Tax Landscape in 2025

Australia abolished its federal estate and inheritance taxes in 1979, distinguishing it from many other developed economies like the US and UK. However, as property prices and superannuation balances hit record highs, the federal government and several state governments have renewed discussions about potential reforms. In 2025, no formal estate tax exists, but several tax obligations can impact beneficiaries:

• Capital Gains Tax (CGT): While assets passed to beneficiaries are not taxed immediately, CGT may apply when they’re eventually sold, often at the original cost base.

• Superannuation Death Benefits Tax: Payments to non-dependent beneficiaries can attract taxes of up to 32% on the taxable component.

• Deceased Estate Income Tax: Any income generated by the estate during administration is subject to income tax at individual rates.

In 2025, Treasury is reviewing submissions from policy groups advocating for the reintroduction of a targeted inheritance tax to address wealth inequality. While no legislation is imminent, the conversation is far from over.

Real-World Estate Planning Examples

Consider Maria, a retiree in Sydney with an investment property, superannuation, and shares. Upon her passing in 2025:

• Her property passes to her children. They don’t pay tax immediately, but if they sell, CGT applies based on Maria’s original purchase price.

• Her superannuation goes to her adult son, who isn’t a dependent. He pays up to 17% tax on the taxable component, plus Medicare levy.

• Dividends from her shares received during the estate administration period are taxed at individual rates.

These tax outcomes highlight the importance of careful estate planning, even in a country without a formal estate tax.

Estate Tax Policy Trends & What’s Next

The political climate in 2025 is charged with debate over tax reform. Advocacy groups, including the Grattan Institute and ACOSS, have called for a modern inheritance tax targeting large estates to fund essential services. The federal government’s Intergenerational Report flagged the growing divide between property-owning and non-owning Australians as a key policy challenge.

Key policy trends to watch:

• Targeted Tax Proposals: Suggestions include exempting the family home but taxing inheritances above a certain threshold, or only taxing superannuation death benefits for non-dependents.

• Superannuation Rule Changes: Ongoing reforms may further tighten tax treatment for non-dependent beneficiaries.

• Transparency & Reporting: Greater reporting requirements for trusts and large estates are being discussed to prevent tax avoidance.

While the likelihood of a new estate tax in 2025 remains low, keeping informed about these trends is essential for anyone with significant assets or inheritance expectations.

Smart Estate Planning Strategies

In the absence of a formal estate tax, Australians can still take proactive steps to minimise tax on their estate:

• Regularly update your will and beneficiary nominations, particularly for superannuation accounts.

• Consider the tax implications of gifting assets during your lifetime versus bequeathing them after death.

• Utilise testamentary trusts to provide flexibility for beneficiaries and potential tax benefits.

• Seek advice on structuring ownership of investment properties and shares for optimal CGT outcomes.

With policy changes on the horizon, reviewing your estate plan annually is more important than ever.