Inheritance in Australia 2025: Rules, Taxes & Smart Strategies

Australia is in the midst of the largest intergenerational wealth transfer in its history. With baby boomers passing on an estimated $3.5 trillion to their children and grandchildren by 2050, inheritance is no longer a topic for the distant future—it’s a pressing financial reality for millions of Australians in 2025.

Understanding How Inheritance Works in Australia

Unlike many countries, Australia does not have a specific inheritance tax. But that doesn’t mean inheritances are free of complexity. Here’s what happens when someone dies and leaves assets:

• Probate Process: Most estates must go through probate—a court process that validates the will and appoints executors to distribute assets. In 2025, digital probate applications are now available in NSW and VIC, streamlining the process but still requiring careful documentation.

• Intestacy Rules: If there’s no valid will, state-based intestacy laws decide who inherits. Generally, spouses and children are first in line, but distant relatives may inherit if there are no close family members.

• Superannuation: Super isn’t automatically part of the estate. Binding nominations determine who receives your super. Recent 2025 regulatory tweaks now require super funds to notify beneficiaries sooner, aiming for more transparency.

Tax Implications: What Heirs Need to Watch in 2025

While Australia doesn’t levy inheritance tax, receiving an inheritance can trigger several tax obligations:

• Capital Gains Tax (CGT): Inherited assets like property or shares aren’t taxed at the time of inheritance, but CGT may apply if you sell them. The cost base is reset to the value at the date of death for assets acquired after 1985.

• Superannuation Death Benefits Tax: If superannuation is paid to a non-dependent (such as adult children), a tax of up to 17% applies to the taxable component. The ATO updated its guidance in 2025 to clarify these rules, especially for blended families and de facto relationships.

• Income from Inherited Assets: Rental income from inherited property or dividends from shares is subject to standard income tax.

Example: When Michael inherited his mother’s investment property in Sydney in 2025, he wasn’t taxed initially. But when he sold the property two years later, he had to pay CGT on the increase in value since his mother’s death.

Estate Planning Pitfalls—and How to Avoid Them

Inheritance can be a blessing or a source of family conflict. Avoiding common mistakes is crucial:

• Not Having a Will: Dying intestate (without a valid will) can delay asset distribution and cause disputes. With digital will storage and online witnessing now legal in most states, there’s little excuse for not having an up-to-date will.

• Unclear Superannuation Nominations: Ensure your super fund has a valid, binding nomination. In 2025, super funds are cracking down on lapsed or ambiguous nominations, which can leave your loved ones in limbo.

• Overlooking Blended Family Dynamics: With one in three Australian families being blended, disputes over inheritance are rising. Consider testamentary trusts and clear communication to protect everyone’s interests.

• Ignoring Digital Assets: In 2025, digital assets—cryptocurrency, online accounts, digital photo libraries—are often forgotten. Include instructions in your will for digital assets to avoid complications.

Practical Steps for Australians Expecting or Planning an Inheritance

• Review Your Estate Plan Regularly: Life changes—marriage, divorce, children—should prompt a will update.

• Talk to Family: Open discussions can prevent surprises and reduce the risk of legal challenges.

• Seek Professional Advice: Tax, legal, and financial advice is essential, especially for complex estates or large inheritances.

• Stay Informed: With inheritance laws and tax rules evolving, especially after the 2025 ATO superannuation guidance update, staying current is essential.