
What to expect from tax reform?
August 28, 2025Over the next few decades, Australia is expected to
witness one of the biggest intergenerational wealth transfers in history with
between $3.5 trillion and $5 trillion changing hands as baby boomers pass on
their wealth to children and grandchildren.
If you're expecting to inherit from your parents or
grandparents, or you're thinking about the legacy you’ll leave to your loved
ones, it’s important to understand the tax traps and planning strategies that
come with this enormous transfer of wealth. While there’s no inheritance tax in
Australia, there are other hidden tax pitfalls that can reduce the value of
what’s passed down.
The tax traps you should know
Capital gains tax (CGT)
Receiving cash doesn’t attract tax but inheriting
property, shares or other investments can trigger capital gains tax (CGT),
depending on how and when those assets are sold. For example, if you inherit a
home and it’s sold within two years of the deceased’s passing, the sale may be
exempt from CGT – provided the home was the person’s main residence.
If you keep the property for longer or it was being
used to produce income, CGT could apply down the track when you sell.
Superannuation
Super is another area full of complexity. When someone
inherits super, whether or not they pay tax on it depends on a few things –
like who they are and how the money is paid.
If the person receiving the super is a “tax dependent”
– for example, a spouse or a child under 18 – they usually won’t have to pay
any tax if the super is paid as a lump sum.
However, if the person inheriting the super death
benefit isn’t a tax dependent (such as an adult child), your super fund will
withhold tax before paying the money out. This can range from 17% to 32%
(including Medicare levy), depending on the type of contributions that were
made to your account (eg, concessional or non-concessional contributions).
Getting advice about how super is structured and who
your beneficiaries are can make a big difference in how much tax is paid.
Gifting assets before death
Some people choose to give assets like property or
shares to their children while they’re still alive – either to help them out
financially or to reduce the size of their estate. While this can be a
thoughtful move, it can also lead to an unexpected tax bill.
That’s because giving away certain assets (like an
investment property or shares) is treated like selling them, which means CGT
may apply. The tax is worked out based on the difference between what the asset
is worth now and what you originally paid for it.
However, if the person giving the gift has made a loss
on other investments in the past, they may be able to use those losses to
cancel out some or all of the gain, reducing or even eliminating the tax they
have to pay.
This is why it’s important to get advice before making
any big gifts – so you know exactly what the tax consequences might be.
Trusts and family structures
Using a family trust or testamentary trust (a trust
set up under a will) can offer flexibility and tax savings. These structures
allow more control over who receives income and when – which can help manage
tax across the family group and avoid disputes. But they need to be set up
correctly and in line with your wishes.
Tips to protect your family’s wealth
1. Get your will
and estate plan in order – having a legally binding will is the foundation of a
good wealth transfer plan. It’s also wise to appoint a power of attorney and an
executor who understands your wishes and has the emotional and practical
ability to carry them out.
2. Talk openly
with your family – the emotional side of inheritance is just as important as
the financial side. Discuss your intentions early to avoid surprises and
prevent family conflict down the line.
3. Understand the
tax implications – don’t assume everything passes tax-free. Ask questions about
CGT, super and gifting – especially if you’re likely to inherit property,
shares or other non-cash assets.
4. Review your
super nominations – make sure your beneficiaries are up to date and that you’ve
completed the right type of nomination form (binding vs non-binding). This
helps ensure your super goes where you want it to, without unnecessary tax or
delay.
5. Seek
professional help – the rules are complex, and mistakes can be costly. Getting
the right advice from a professional who understands estate planning and tax
can help you make smarter decisions and keep more money within your family
unit.
Need help planning or receiving an
inheritance?
Whether you’re planning your legacy or expecting to
receive one, we can help you navigate the rules, reduce the tax and protect
what matters most.