Inheriting Cash

When cash is transferred from a deceased individual to their estate and then on to a beneficiary, there are generally no direct tax consequences, provided the cash is in Australian dollars (AUD).

Inheriting Assets

Death itself is a CGT event — but the rules provide relief. Normally, a capital gain or loss triggered by death is disregarded if the asset passes:
– To the deceased’s legal personal representative (executor); or
– Directly to a beneficiary of the estate.

The exemption does not apply if the asset passes to:
– An exempt entity (with some exceptions for deductible gift recipient charities);
– A complying superannuation fund; or
– A foreign entity where the asset is not taxable Australian property.

Once an asset is transferred to a beneficiary, any future disposal is subject to CGT based on the inherited cost base.

Inheriting Shares

The tax outcome depends on the deceased’s residency and the acquisition date of the shares:

– Post-CGT shares (acquired after 20 Sept 1985):
  If the deceased was an Australian resident, the beneficiary generally inherits the original purchase cost base.
  Example: If your mother bought BHP shares for $17.82 in 1997, your cost base is $17.82.

– Pre-CGT shares (acquired before 20 Sept 1985):
  The cost base is reset to market value at the date of death.
  Example: If your mother passed away on 1 October 2024, when BHP shares closed at $45.96, that becomes your cost base.

– Non-resident deceased:
  In most cases, the cost base is the market value at date of death.

Inheriting Property

Residential property brings additional complexity, especially around the main residence exemption:

– Generally, the executor or beneficiary inherits the deceased’s cost base.
– If the property was the deceased’s main residence and not used to generate income, a full CGT exemption may apply if either:
  • The property is sold within two years of death; or
  • It continues to be the main residence of the spouse, an individual with a right to occupy under the will, or the beneficiary until disposal.

– An extension of the two-year period may be granted in limited circumstances (e.g. contested wills).
– The absence rule may also allow the deceased to continue treating the property as their main residence even after moving.

If the deceased was a non-resident at the time of death, the cost base is usually the original purchase price if acquired post-CGT.

Inheriting Foreign Property

If you are an Australian resident inheriting a foreign property from a non-resident, the cost base is generally the market value at the date of death.

When you later sell the property:
– CGT applies in Australia, but the CGT discount may be less than 50%.
– If tax is also paid overseas, a foreign income tax offset may be available to reduce double taxation.