No, there is no inheritance tax in Australia.
Inheritance tax is a levy paid on the assets or the value of an estate inherited from a deceased person. It’s calculated based on the total value of the deceased’s assets, minus any liabilities.
The tax rate and exempted threshold can vary depending on the jurisdiction. Not all countries impose an inheritance tax; in some places, it might be referred to as a “death duty” or “estate tax.”
The specific rules, rates, and exemptions differ widely among countries. In essence, inheritance tax ensures that a portion of the wealth accumulated by an individual is returned to the state upon their death.
Is There an Inheritance Tax in Australia?
No, there is no inheritance tax in Australia. While Australia did have inheritance taxes in the past, they were abolished in 1979.
However, while there’s no specific “inheritance tax,” beneficiaries might be subject to other taxes, such as capital gains tax (CGT), depending on the type of asset and circumstances of the inheritance.
For instance, capital gains tax may apply if a beneficiary sells an inherited property not considered the deceased’s primary residence.
Historical Perspective: When was the Inheritance Tax Abolished in Australia?
The inheritance tax in Australia, often called “death duties,” was abolished in the late 20th century. The move began at the state level before being eliminated at the federal level.
The state of Queensland was the first to abolish death duties in 1977, driven by Premier Joh Bjelke-Petersen.
Following Queensland’s lead, other states also abolished their death duties to remain competitive and prevent capital flight to Queensland.
By 1981, all states had abolished their inheritance taxes. On the federal level, Australia had stopped levying death duties in 1979.
The abolition was partly due to the administrative complexities and perceived inequities associated with the tax.
You won’t have to pay immediate tax when you inherit shares or stocks. However, tax implications can arise when you sell or dispose of those inherited shares.
Here’s a breakdown of the taxation related to inherited shares and stocks:
- Date of Acquisition: For Capital Gains Tax (CGT) purposes, if the deceased acquired the shares before 20 September 1985 (pre-CGT), the beneficiary is considered to have acquired the shares on the date of the deceased’s death. If the deceased acquired the shares on or after 20 September 1985 (post-CGT), the beneficiary is considered to have acquired the shares on the date the deceased did.
Selling the Inherited Shares:
- If you decide to sell the inherited shares, you may have a capital gain or loss. The difference between the sale price and the cost base determines this.
- If you sell shares acquired pre-CGT by the deceased, you’ll use the market value on the date of their death as your cost base.
- If the shares were post-CGT, you’d take on the deceased’s original cost base and apply it when calculating any capital gain or loss.
- Other Considerations: Holding period, personal use assets, and other specific circumstances can influence how CGT is applied.
Maintaining records of the inherited shares, including the date of the deceased’s death, the value of the shares at that time, and any other relevant documentation, is crucial.
Given the complexity of tax laws, if you inherit shares or stocks, the role of will lawyers and a tax professional or financial advisor will help ensure compliance with Australian tax regulations and understand potential tax liabilities.
What Should I Do if I Think My Inheritance Was Incorrectly Taxed?
If you believe your inheritance was incorrectly taxed in Australia, it’s essential to approach the situation methodically to ensure you address the issue correctly and efficiently.
Here are the steps you should consider taking:
- Review Documentation: Before taking further steps, thoroughly review all documents related to the inheritance, including any tax statements, calculations, and correspondence from the Australian Taxation Office (ATO) or the will’s executor.
- Seek Professional Advice: It’s crucial to consult with a tax professional, such as an accountant or a tax lawyer, to get an expert opinion on the matter. They can help you understand the tax laws related to your inheritance and guide you on the best course of action.
- Contact the Executor or Trustee: If you believe there’s an error, discuss your concerns with the executor or trustee of the deceased’s estate. They might provide clarity or rectify any mistakes.
- Engage with the ATO:
- Lodge an Objection: If you disagree with an ATO assessment, you can lodge an objection. This must be done within a specific timeframe, typically two years for individuals and small businesses and four years for other taxpayers from the day the assessment was given.
- Seek ATO Assistance: The ATO has dedicated helplines and online resources to assist taxpayers with their queries. You can contact them to clarify any doubts or concerns.
- Alternative Dispute Resolution (ADR): If you cannot resolve the issue directly with the ATO, consider participating in an ADR process. This can be a less adversarial and more cost-effective way to resolve disputes than litigation.
- Appeal to the Administrative Appeals Tribunal (AAT): If the objection decision made by the ATO is still unsatisfactory, you can appeal the decision with the AAT. Ensure you’re aware of the time limits and the necessary processes.
- Litigation: If the dispute isn’t resolved through the above channels, you may consider taking the matter to court. It’s essential to have legal representation if you choose this route.
- Stay Informed: Tax laws can be complex and may change over time. Stay updated with new developments, especially those related to inheritance and deceased estates.
Remember, proactive communication and seeking expert advice early in the process can help prevent misunderstandings and expedite the resolution of any issues.
Is There Inheritance Tax in Australia?
No, as of 2023 there are discussions about implementing an inheritance tax but nothing has been put in place.
Whether you’ve recently inherited assets or are planning for the future, get the clarity you deserve. Don’t leave your financial legacy to chance.
Contact Walker Pender today, and let us guide you through Australia’s inheritance landscape. Your peace of mind is our top priority.