I am glad to report that Australia is one of the very few western countries that does not charge any inheritance tax or death duty.
As such you will not have any government cost when you receive your inheritance.
Unfortunately this may not protect you against any duty that may be levied in the country you receive the inheritance from, such as the United Kingdom, but there will be no additional impost in Australia.
Even though there may be no inheritance tax issues in Australia, you still need to be mindful of the potential future capital gains tax and income tax that could become an issue if you receive an asset rather than just a cash benefit.
In cases where you receive cash, your only concern in Australia is if that cash is placed on deposit, either in Australia or overseas, as any interest earned would need to be declared each year in your Australian tax return if you are living in Australia as a tax resident. This is regardless of whether you actually transfer the money to Australia or leave it overseas.
The tax cost on this would depend on your other income, such as salary, as we have a marginal tax rate system in Australia.
If you receive your inheritance by way of transfer of the asset to your names, such as shares or property, then on the initial transfer there will be no tax consequence.
When the asset generates an income, such as dividends or rent, then this would need to be declared in your Australian income tax return, once again taxable at your prevailing marginal rate.
Upon eventual sale of the asset, there is Capital Gains Tax to bring to account. For Australian tax purposes, an offshore inheritance of an asset is deemed to be given to you at the market value on the date you inherited it. Only profits above this amount would be subject to Australian taxation on sale.
For example, if you inherit your parents home in London that they may have bought originally for £45,000 but when you received it the value was now £350,000, the for Australian tax purposes the “tax cost” is £350,000. If you sold the property later for £375,000 only £25,000 of the gain would be subject to Australian Capital Gains Tax, the reset would be tax free.
If you had kept the property longer than 12 months from date of inheritance before selling, then a further concession of half the taxable component would be tax free, so you would only need pay tax on £12,500 at your prevailing marginal rate.
This methodology would apply to any type of inheritance asset including property, shares, investments or artworks.
It is important that when you do receive any asset as an inheritance that you ensure you are given a formal valuation to confirm the value at time of receipt so you can properly establish your starting point for Australian Tax purposes.
Apart from that, you have no other obligations to concern yourself about in Australia.
