Inheriting assets from overseas can be emotionally and financially significant — but also complex from a tax perspective. While Australia doesn’t charge inheritance tax, there are important rules around foreign assets that can affect your tax return. This guide walks you through what you need to report, how Capital Gains Tax (CGT) works, and the common traps to avoid.
Is There Inheritance Tax in Australia?
No. Australia does not impose inheritance or estate tax. If you receive assets from a relative overseas, you do not pay tax on the receipt itself. However, future income or capital gains from those assets may be subject to tax in Australia.
- You do not pay tax just for receiving the inheritance.
- You do pay tax if you earn income (e.g., rent or dividends) or sell the asset at a profit.
What Inherited Assets Can Trigger Tax?
Different types of assets have different tax consequences when inherited. Here's how the most common assets are treated:
- Overseas Real Estate: Rental income is taxable in Australia. If you sell the property, Capital Gains Tax (CGT) may apply.
- Foreign Shares: Dividends received must be declared as income. If you sell the shares, CGT applies to any gain.
- Bank Funds: You won’t be taxed on the inherited funds themselves, but any interest earned on those funds is taxable.
- Superannuation or Pensions: Depending on the country of origin and structure of the fund, some foreign pensions may be fully or partially taxable in Australia.
Foreign Inheritance Tax: What Happens Overseas?
Some countries, like the UK or US, may impose inheritance or estate taxes on the deceased’s estate before assets are distributed to you. Australia generally does not grant tax credits for these foreign estate taxes, unless a Double Taxation Agreement (DTA) applies.
- Check if the country of origin has estate/inheritance taxes.
- Verify if Australia has a DTA with that country.
Tip: You may need a foreign tax advisor to resolve liabilities before funds are repatriated to Australia.
Capital Gains Tax on Inherited Overseas Assets
Capital Gains Tax (CGT) may apply when you dispose of an inherited asset (e.g., sell, transfer, or gift it). The tax treatment depends on when the deceased acquired the asset and whether it was their main residence.
- Pre-CGT Assets (acquired before 20 Sept 1985): No CGT payable in most cases.
- Post-CGT Assets: Your cost base is usually the asset's market value at the date of death.
- Main Residence Rule: Exemptions generally apply to Australian property — but not always for overseas homes.
Reporting Foreign Inheritance to the ATO
Australians must report foreign income and gains in their annual tax return. You do not need to declare the asset itself, but you must declare income or disposal events related to it.
What you need to report:
- Rental income, dividends, or interest earned from foreign assets
- Capital gains or losses from selling inherited assets
- Foreign exchange gains or losses if relevant
Recordkeeping is crucial:
- Date of inheritance and asset value in AUD
- Proof of ownership and any income received
- Exchange rates used for conversions
Common Mistakes to Avoid
- Assuming inheritance is always tax-free — income or sales can still trigger tax.
- Failing to declare offshore income — the ATO uses global data-sharing networks.
- Not converting currency correctly — use ATO-approved exchange rates.
When to Seek Professional Advice
If your inheritance includes property, investments, or pensions across multiple countries, the legal and tax issues can be complex. A licensed tax accountant or solicitor can help you navigate:
- Foreign probate procedures
- Double taxation rules
- Timing strategies to reduce tax impact
Recommended: Speak to an Australian tax advisor experienced in international estate matters.
Frequently Asked Questions
Many Australians are unsure about what to report and when. These FAQs answer some of the most common concerns surrounding foreign inheritance and tax.
Q: Do I have to report my foreign inheritance to the ATO?
You don’t need to report the gift or inheritance itself. But if it earns income or is sold, you must report that activity.
Q: Will I be taxed if I bring the money into Australia?
No — transfers of inheritance money are not taxable. However, income earned from that money (e.g., interest) must be declared.
Q: Can the ATO track foreign inheritance?
Yes — Australia participates in the Common Reporting Standard (CRS), which enables information sharing between global tax authorities.
Final Tips: Stay Compliant, Stay Informed
Dealing with inherited overseas assets can quickly become complex — especially when multiple tax systems and reporting rules are involved. While Australia doesn’t impose inheritance tax, the income you earn or gains you make from inherited assets can still attract tax obligations.
To stay on the right side of the law, it’s essential to:
- Keep clear records of asset values at the date of inheritance (in AUD)
- Declare any income (rental, interest, dividends) and capital gains accurately
- Understand how Double Taxation Agreements may apply to your situation
If you’re unsure about your obligations, don’t leave it to guesswork. Consulting with a legal or tax professional can save you from costly mistakes, especially when dealing with cross-border assets.
Need help? LegalFinda connects Australians with trusted legal experts who specialise in tax, estates, and international asset matters. Whether you’ve just received an overseas inheritance or are planning your estate, our network can guide you through the next steps.
Visit LegalFinda today to find the right legal support and protect your financial future.
