top of page

Tax Considerations of Inheritance (and how to plan ahead for it)

Updated: May 6


Unlike many countries, Australia does not have 'inheritance or estate taxes' however beneficiaries can pay tax on inherited assets by:


  • Paying tax on the 'taxable' component of superannuation accounts that they inherit.

  • Receiving assets which they later sell. For the purposes of qualifying for the CGT discount, you can treat an inherited asset as though you have owned it since:

  • the deceased acquired the asset, if they acquired it on or after 20 September 1985 (when CGT was introduced).

  • the deceased died, if they acquired the asset before 20 September 1985.


Common Exemptions


The family home of the deceased is often fully or partially CGT exempt when sold within 2 years of the date of death.


If the deceased ran their own small business at the time of death, and meet the eligibility criteria for the small business CGT concessions, the deceased estate will be eligible for the small business CGT concessions where:

  • the asset is disposed of within two years of the date of death (although the Commissioner may allow a longer period by granting an extension of time). and

  • the asset would have qualified for the small business CGT concessions if the deceased had disposed of the asset immediately before his or her death.


Pre-Planning


Commonly, Financial Advisers can assist aging and wealthy clients minimise the likely super tax & CGT payable on their assets by:


  • Increasing the tax-free components of superannuation through recontribution strategies.

  • CGT harvesting high capital gains tax assets over a number of years in retirement when an individuals income may be below the tax free-threshold.

  • Alongside an estate planner, creating testamentary trusts which can own the assets and benefit from favourable tax treatments (such as minor children receiving adult tax rates and the tax free threshold).


Post-Planning


If you have just received an inheritance with property and assets containing large capital gains, there are a number of strategies available:


  • Retaining the assets long term

  • Selling in a year when you may be on a lower tax rate such as retirement or paternity leave

  • Selling and making carry forward contributions into superannuation to reduce your capital gains tax liability


Dealing with the passing of a loved one is undoubtedly a challenging time, and managing the financial aspects of their estate can add an extra layer of complexity. To reduce this complexity and likely tax, it is always preferrable to discuss the family wealth transfer with your Adviser years, if not decades in advance.


The purpose of this content is to provide general information only and is not personal financial advice. To book in an obligation free initial appointment visit https://www.sourcewealth.com.au/freeinitialappointment

11 views0 comments

תגובות


bottom of page