Inheritance Tax in Australia: 2025 Policy Changes & What They Mean

Inheritance tax has long been a topic of heated debate in Australia. While our nation famously scrapped federal inheritance taxes back in 1979, whispers of their return have grown louder in 2025. As intergenerational wealth transfer accelerates and government budgets face mounting pressures, the question is back on the policy agenda: could inheritance tax make a comeback, and what would it mean for Australian families?

Australia’s Current Position: No Inheritance Tax—But Not Tax-Free

Despite ongoing public confusion, Australia does not have a formal inheritance tax. That means when you receive money or assets from a deceased estate, there’s no direct tax applied simply because you inherited. But that doesn’t mean inheritances are always tax-free. Here’s how it works in practice in 2025:

• Capital Gains Tax (CGT): If you inherit assets like property or shares, you may pay CGT when you eventually sell them. The asset’s cost base is generally reset to the market value at the date of death, but there are exceptions and complexities—especially if the deceased acquired the asset before 20 September 1985 (when CGT was introduced).
• Superannuation Death Benefits Tax: If you inherit super and you’re not a tax-dependent (such as an adult child), you could pay up to 17% on the taxable component.
• State Duties: Some states apply stamp duty on certain inherited assets, such as investment properties transferred outside the immediate family.

The upshot? Inheritance can trigger indirect taxes, even if there’s no explicit “death duty”.

The 2025 Policy Debate: Why Inheritance Tax Is Back in the Spotlight

With federal and state budgets stretched by cost-of-living relief, health, and housing crises, tax reform has taken centre stage in Canberra. In 2025, several think tanks and economists—including the Grattan Institute and Productivity Commission—have called for a renewed look at inheritance taxes as a way to tackle wealth inequality and boost public revenues.

Key drivers behind the debate:

• Baby Boomer Wealth Transfer: Over $3.5 trillion is expected to be passed down between generations over the next two decades, with much of it concentrated in property-rich households.
• Budget Pressures: Governments are searching for sustainable revenue sources as the population ages and spending needs grow.
• Global Comparisons: Most OECD countries—including the UK, US, France, and Japan—levy some form of inheritance or estate tax. Australia is now in the minority.

While no concrete legislation has been introduced, several policy models are being floated:

• Low-rate taxes on inheritances above a high threshold (e.g., $2 million).
• Exemptions for family homes and farms.
• Options to defer payment until the inherited asset is sold.

Major parties remain cautious, but with a federal review of intergenerational equity due in late 2025, the landscape could shift rapidly.

What Would an Inheritance Tax Mean for Australian Families?

For many Australians, the prospect of an inheritance tax raises tough questions about fairness, family, and the future. Here’s what families should consider if the policy tide turns:

• Estate Planning: Wills, trusts, and superannuation strategies may need to be revisited. Early gifting or restructuring family assets could become more attractive—though tax rules often evolve to close loopholes.
• Generational Impact: Young Australians could benefit from revenue reinvested in housing, health, or education, but older Australians may worry about the legacy they can leave behind.
• Asset Classes: Family homes are likely to remain protected, but investment properties, shares, and business assets could come under the microscope.

Real-world example: In the UK, inheritance tax kicks in at 40% for estates above £325,000, but main residences passed to children have a higher threshold. Policy designers in Australia are watching these models closely, seeking to balance fairness with simplicity and family cohesion.

Preparing for Change: Steps Australians Can Take in 2025

While no inheritance tax is in force yet, prudent financial planning is always wise. In 2025, consider the following:

• Review your will and superannuation beneficiaries regularly.
• Discuss your estate plans with family members and professional advisers.
• Stay informed about policy developments and budget updates.

And remember: changes to tax law often come with transitional rules, so there’s rarely a need for panic—but being proactive can help you protect your legacy.