We often hear about the importance of having a will to protect our assets and direct them to the right places, but little effort is made to educate people about what it means to be the beneficiary of a deceased estate.  By seeking some professional advice before or after you inherit, you will be better placed to manage your inheritance and minimise the associated tax obligations.

Fortunately there are no death duties in Australia, so death itself does not attract any extra tax.  However, if you inherit any assets, such as property (other than the family home), shares, or other investments, you may be liable for capital gains tax (CGT) when you sell them.  Finding out the assets purchase prices, or values, at the date of death will help save you time and money when you sell them and come to do your tax.  You can also minimise or avoid CGT by finding out when it would be most advantageous to sell the assets, taking into account factors like any capital losses you may have that year, or favourable market trends.

In most circumstances, the family home is exempt from CGT and the same applies if you inherit a family home, provided you sell it within two years.  Outside of this period, you may be assessed on the increase in value since the date of death at the time of sale, and therefore be subjected to CGT.

In the year of the deceaseds death, two tax returns are required one for the deceased person up to the date of death and one for the estate for the rest of the year.  It is worth getting advice on how to minimise both your tax and the estates.  In some situations, less tax may be payable if the estate sells an asset and gives you the cash, rather than you getting the asset and selling it yourself.

Receiving an inheritance is an important life event which deserves careful planning and consideration.