You will be glad to know that Australia does not have any Inheritance Tax or Estate Duty so on that front there is nothing to pay.
You should however consider the possible implications for Capital Gains Tax as this may be imposed when you eventually sell the property.
Even though you live overseas, the property is subject to Capital Gains Tax upon sale. When you receive the property through an estate, there is a “Cost Base” for tax purposes attached to it.
In calculating the cost base, it is necessary to consider what the property was used for prior to death.
If it was the persons primary residence (their home), then you are deemed to have acquired the property on the date of death at the true market value on that date. When you subsequently sell the property, you will only have to declare profits above the market value.
In the same way, if the house had been purchased by the person prior to 20th September 1995, when Capital Gains Tax was introduced, then the same market value cost base will also apply.
If the property had been used as a rental or investment property, then it is treated differently. You are deemed to acquire the property at the original cost, so in essence the capital gains tax liability up to that point is effectively transferred to you.
When you sell, the entire profit from the original purchase price is taxable at that time.
In all circumstances, once you have owned the property longer than 12 months, then half of any gain will be free of tax and therefore reduce the liability significantly.
You can also use any other accrued losses built up whilst overseas to reduce any tax exposure which may mean that it is a good time to review your circumstances in the event of an inheritance.
Remember to also include as income any rental that you may start to receive from the property in your annual income tax return in Australia.
