With the world becoming more connected, it’s increasingly common for Australians to inherit property or money from overseas relatives. According to the Australian Bureau of Statistics, nearly 30% of Australians were born overseas — meaning cross-border inheritance is no longer rare. But with international assets come tax implications when inheriting foreign assets, especially around whether you need to pay tax in Australia and how to report it to the ATO.
If you're aged 40 or over and facing inheritance from abroad, understanding your tax responsibilities and obligations under Australian law is crucial. Let’s break down what happens from a legal and financial standpoint when foreign inheritance lands in your name — and how Legal Finda can guide you every step of the way.
Is Foreign Inheritance Taxable in Australia?
Australia doesn’t have a formal inheritance tax, which might sound like a relief. However, that doesn’t mean you’re completely off the hook. To understand the tax implications when inheriting foreign assets, here’s what you need to know:
- You typically do not pay tax just for receiving an inheritance.
- But you may owe tax later — especially when you sell an inherited asset or earn income from it (like rent or dividends).
- Any capital gains made after inheriting could trigger obligations under Australian tax law.
So while inheritance itself might not be taxed, what you do with the assets afterward can definitely attract tax scrutiny.
When and How to Report to the ATO?
Whether it’s a family home in Italy or a Swiss bank account, the ATO expects full transparency. Tax implications when inheriting foreign assets include obligations to disclose, declare, and possibly pay tax on future income or gains.
Key ATO reporting requirements include:
- Declaring foreign income or capital gains from inherited assets in your annual tax return.
- Reporting asset sales that might trigger Capital Gains Tax (CGT).
- Lodging a Foreign Income Tax Offset (FITO) if you’ve already paid tax overseas.
The ATO is also part of the Common Reporting Standard (CRS), which means it receives data from other countries about offshore assets — making it risky to leave anything unreported.
Do I Pay Tax on Foreign Inheritance in Australia?
This is one of the most searched questions when dealing with tax implications when inheriting foreign assets.
Here’s a breakdown by asset type:
- Cash: Not taxable when received, but interest earned in Australian banks afterward is taxable.
- Overseas property: Not taxed at inheritance, but CGT applies when sold, based on the property’s market value at the time of inheritance.
- Shares or business holdings: Taxable only when sold or if they generate income (like dividends).
Even if you've paid taxes overseas, you may still be obligated to report and pay additional tax in Australia, depending on your residency and income. Double tax agreements can prevent you from being taxed twice — but only if used correctly.
Inheriting Overseas Property: Australia’s Approach to Cross-Border Estates
Among the most complex tax implications when inheriting foreign assets is dealing with real estate abroad. From legal transfer procedures in foreign countries to ATO obligations at home, the process can be daunting.
Common tax and legal issues include:
- Whether you need to sell or hold the property
- Determining the Capital Gains Tax liability in both countries
- Converting property value into AUD using accurate and accepted exchange rates
You’ll also need to retain records of valuations, foreign taxes paid, rental income, and any local inheritance documents to avoid disputes or fines in Australia.
Capital Gains Tax on Inherited Foreign Property: When Does It Apply?
Many Australians misunderstand CGT and its role in tax implications when inheriting foreign assets, especially with property.
In general:
- CGT is not payable at the time of inheritance.
- It applies only when the asset is sold.
- The gain is calculated based on the asset’s market value on the date of inheritance — not its original purchase price.
For example, if you inherit a French apartment valued at $600,000 at the time of the relative’s death, and later sell it for $750,000, the $150,000 gain is potentially taxable under Australian law.
CGT discounts may apply, but only if the property was held for more than 12 months and other criteria are met.
Joint Inheritance and Overseas Beneficiaries: A Tax and Legal Maze
If you’re sharing inheritance with family members overseas, the tax implications when inheriting foreign assets become even more complicated. Factors to consider include:
- Dividing ownership fairly under differing local laws
- Reporting your percentage share of income and capital gains
- Resolving disagreements on property management or liquidation
In these cases, it's best to consult both an Australian tax adviser and an international estate lawyer to ensure compliance and clarity.
Should You Hire a Lawyer or Tax Agent for Foreign Inheritance?
If the foreign inheritance is small and straightforward, you might be able to manage on your own. But when you’re dealing with:
- Overseas real estate
- Multiple beneficiaries
- Foreign legal systems or tax authorities
... the risks of getting it wrong — and the cost of penalties — can outweigh professional fees. The tax implications when inheriting foreign assets are simply too complex for DIY solutions in many cases.
Legal Finda connects Australians with trusted legal and financial professionals who specialise in international estate planning, foreign inheritance disputes, and ATO compliance.
Key Steps to Navigate the Tax Implications When Inheriting Foreign Assets
To avoid future tax surprises, here’s what every Australian inheriting from overseas should do:
- Identify each asset type: real estate, shares, business interests, cash, etc.
- Learn the local laws in the country where the asset is located.
- Get each asset professionally valued at the time of inheritance.
- Report all relevant income or gains to the ATO in your annual tax return.
- Seek advice from experts who understand cross-border estate planning and tax obligations.
Conclusion
Inheriting from overseas can be a financial blessing — but the tax implications when inheriting foreign assets should never be underestimated. Whether it’s the ATO’s reporting rules, capital gains tax, or legal compliance across borders, one misstep could lead to costly delays or penalties.
If you're over 40 and managing or expecting foreign inheritance, Legal Finda is here to help. We’ll connect you with legal and tax professionals who understand how to handle international assets, multiple jurisdictions, and complex tax rules — so you can focus on your future, not paperwork.
Let Legal Finda simplify your cross-border inheritance and ensure you meet all obligations around the tax implications when inheriting foreign assets.
