How to Manage an Inheritance in Australia: A Practical Guide (2026)

Understanding the tax position before acting is essential:

• No inheritance tax in Australia: Australia does not have an inheritance tax or death duties. Beneficiaries do not pay tax on the receipt of an inheritance. This is a common misconception - you do not owe income tax simply because you received money, property, or shares from an estate.
• Capital gains tax on inherited assets: While you do not pay tax on receipt, you may pay CGT when you eventually sell inherited assets. The cost base depends on when the deceased acquired the asset and whether it was their main residence - the rules are detailed and require professional advice for significant inherited property or shares.
• Inherited property and the main residence exemption: If you inherit a property that was the deceased's main residence, special CGT concessions apply. Generally, if you sell within two years of the date of death, any gain may be exempt. Beyond two years, the exemption may be partial or unavailable. Retaining inherited property for longer than two years without using it triggers full CGT liability at eventual sale - seek advice promptly.
• Superannuation death benefits: If you inherit superannuation as a death benefit, the tax treatment depends on your relationship to the deceased and the components of the super balance. A tax-dependent (spouse, minor child) can receive super tax-free. Non-dependants (adult children) may pay tax of 15-17% on the taxable component. This is one of the most tax-complex aspects of inheritance - advice is essential.
• Estate administration income: Income earned by the estate during administration (before distribution to beneficiaries) may be assessed in the estate's name. Interest earned on estate bank accounts or rent from estate property during the administration period is the executor's responsibility to report.

The period immediately after receiving an inheritance is not the time for major investment decisions:

• Do not rush: Unless there is a time-sensitive decision (selling inherited property, managing estate assets), there is rarely an urgent financial decision to make. Parking inherited cash in a high-interest savings account (currently 5%+) while you consider your options is entirely appropriate.
• Understand what you have received: Get a clear picture of the full inheritance - cash, shares, property, superannuation death benefits, business interests. For each asset, understand the tax position (particularly CGT on inherited shares or property) before making any decisions.
• Engage a financial adviser: For inheritances over $50,000, a financial adviser consultation ($300-500) is worthwhile to understand the tax position, assess how the inheritance fits your overall financial situation, and develop a plan.
• Do not tell everyone: Sharing news of an inheritance often attracts unsolicited advice, requests for loans, and relationship complications. Discretion in the short term protects your decision-making.
• Process the emotional dimension separately: An inheritance is often received following a bereavement. Financial decisions made in acute grief are more likely to be regretted. Give yourself time.

The right allocation depends on your individual circumstances - but this framework applies broadly:

• Clear high-interest debt first: Any credit card debt (20%+), personal loans (8-15%), or BNPL balances should be cleared first. Paying off 20% debt delivers a guaranteed 20% return - better than almost any investment available.
• Mortgage offset or paydown: If you have a mortgage, depositing the inheritance into the offset account (or making a lump-sum repayment) delivers a guaranteed return equal to your mortgage interest rate (typically 6-7%) with zero risk.
• Superannuation: If you are within the contribution caps, making a non-concessional super contribution (up to $110,000 per year, or $330,000 over three years using the bring-forward rule) shelters wealth in the low-tax super environment.
• Diversified investment portfolio: For amounts remaining after debt clearance, super optimisation, and emergency fund, a low-cost index ETF portfolio (VAS + VGS or VDHG) is the evidence-backed approach for most Australians.
• Property: If investing in property, ensure the decision is financially justified rather than emotionally driven. Account for all costs - mortgage, rates, insurance, management fees, maintenance, and the opportunity cost of the capital.

Inheritances can create or exacerbate family tensions, particularly where siblings have different expectations or where the inheritance is significant relative to existing wealth disparities. If you are the executor as well as a beneficiary, the dual role adds complexity - consider whether professional executor services are appropriate for complex estates.

If you are in a relationship, an inheritance received during the relationship may be considered property of the relationship in a future property settlement - depending on how it is treated. A family lawyer can advise on strategies to maintain the inheritance as separate property if this is a concern.

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