Receiving an inheritance is often an emotional and life-changing event. While it can provide financial security and new opportunities, it also brings with it important choices. The decisions you make in the months following an inheritance can have lasting tax consequences—and ultimately determine whether your windfall truly supports your long-term goals.
At LINK Wealth, we work with clients to carefully navigate this period, ensuring that their inheritance is structured in a way that aligns with both their financial objectives and Australia’s complex tax landscape.
Understanding the Tax Implications of Inheritance
Many Australians are surprised to learn there is no “inheritance tax” as such. But that doesn’t mean inherited wealth is tax-free. Instead, the tax rules vary depending on the type of asset received.-
- Capital Gains Tax (CGT): Property, shares, or other investments are generally “reset” at the date of death for CGT purposes. While this often means there’s no immediate tax, any future gain you make if you sell or hold the asset can be taxable. Timing your decisions here is critical.
-
- Superannuation Death Benefits: If you inherit super from a parent or other non-dependent, you may face tax of up to 17% on the taxable component. This can significantly reduce the final benefit if not planned for in advance.
-
- Ongoing Income Tax: Income from inherited assets—such as rent, dividends, or bank interest—will be taxed at your marginal tax rate. Without careful structuring, this can push you into a higher tax bracket.
Aligning Decisions with Your Goals
An inheritance isn’t just about what you receive—it’s about what you want to achieve. The right decision depends on your personal circumstances and long-term financial goals.-
- Inherited property: Is it the right investment for you? While holding onto a family property may feel comforting, it may not always make sense financially. Sometimes, selling immediately while CGT is not triggered provides the chance to reinvest in assets more aligned with your goals—such as a more diversified share portfolio or another property in a growth area.
-
- Liquidity vs. legacy: Do you need access to cash for education, a new home, or debt reduction? Or do you want to create long-term income streams for retirement? The balance between liquidity and growth assets is often the key to smart inheritance planning.
-
- Wealth transfer to future generations: For some, the goal is to pass wealth on effectively. That might involve strategies like family trusts or investment structures designed to minimise tax and provide asset protection.
Why Expert Guidance Matters
Every decision—whether to sell, hold, or reinvest—has tax and lifestyle implications. That’s why working with professionals who understand the interplay between financial planning, tax law, and estate considerations is essential. At LINK Wealth, our role is to: • Map your inheritance to your broader financial strategy. • Help you decide which assets to keep, which to sell, and how to reinvest for your objectives. • Coordinate with accountants and estate lawyers where needed to ensure compliance and efficiency. • Provide clarity on upcoming tax changes—such as the new Division 296 superannuation tax—that could affect your inheritance outcomes.Key Takeaways
-
- Inheritances in Australia can still trigger CGT, superannuation taxes, and ongoing income tax.
-
- The best decision depends on your goals: whether to hold, sell, or reinvest assets.
-
- Professional guidance helps turn an inheritance into a long-term financial advantage, rather than a missed opportunity.