30 Jan Inheriting Wealth: What to Do Next

Inheriting Wealth: What to Do Next

An Australian guide to handling an inheritance across cash, shares and property — including the key tax issues to watch and a practical plan for what to do next.

Receiving an inheritance can be emotional and overwhelming. Alongside grief and family dynamics, you’re suddenly faced with financial decisions that can have long-term impacts — especially for accumulators and pre-retirees trying to balance growth, security and lifestyle goals.

Here’s the reassuring starting point: Australia does not have an inheritance (estate) tax. That said, an inheritance can still create tax consequences, mainly through:

• Income tax on what the assets earn (interest, dividends, rent), and
• Capital Gains Tax (CGT) if/when assets are sold.

This article outlines a clear, sensible approach to handling inherited wealth — from cash, to shares/managed funds, to property — and the key tax pitfalls to avoid.

General information only: This is not personal tax, legal or financial advice. Inherited assets can be complex (especially cost base, super death benefits, and estate administration). Get advice tailored to your situation before acting.

The “don’t rush” rule: what to do in the first 30–90 days

Many costly mistakes happen when people feel pressured to “do something” immediately. In most cases, the smartest first move is not investing — it’s getting clarity.

1.) Confirm what you’re inheriting and how it’s being paid

Common inheritance scenarios:

• Cash paid directly to you
• Shares/ETFs/managed funds transferred into your name (or sold and paid as cash)
• Property transferred to you, or sold by the estate and paid as cash
• Superannuation death benefits paid directly to a dependant/beneficiary, or to the estate

If assets are held temporarily inside the deceased estate (while the executor administers it), there may be estate income (interest/dividends/rent) and reporting requirements.

2.) Park funds safely while paperwork settles

If you receive cash, it’s fine to hold it in a secure account for a period while you:

• gather documents,
• understand the tax position, and
• decide how the inheritance fits your bigger plan.

3.) Create a “tax file” for the inheritance

Ask for (or collect):

• date-of-death valuations for shares and property,
• purchase history where possible (especially for CGT),
• dividend/distribution statements,
• rental income/expense summaries (if property was rented),
• any estate distribution statements from the executor.

4.) Set aside a tax buffer

Even though there’s no inheritance tax, you may later owe tax because:

• selling assets can trigger CGT, and/or
• holding assets produces ongoing taxable income.

A tax buffer reduces the chance you’ll need to sell assets at the wrong time to pay a bill.

Tax implications: cash vs shares vs property (plus super)

A. Inheriting Cash

Tax on receiving it: typically no (no inheritance tax).
Tax afterwards: interest earned on the cash is taxable.

Practical takeaway: With a cash inheritance, the tax question is usually not the inheritance itself — it’s what you do next with the money and what income it generates.

B. Inheriting Shares, ETFs, or Managed Funds

Shares and funds are often straightforward operationally, but tax outcomes hinge on CGT cost base.

The key concept: the inherited “cost base”

CGT isn’t about what the asset is worth when you inherit it — it’s about the cost base that applies under the tax rules. This can depend on things like when the deceased acquired the asset and other CGT factors.

If you later sell inherited shares/ETFs/funds, CGT is generally calculated using that inherited cost base framework.

Ongoing tax while you hold investments

• Dividends and distributions are generally taxable.
• If investments remain inside the estate for a period, there can be estate income and beneficiary reporting requirements.

A simple decision rule: keep or sell?

Inherited investments often arrive as a collection of holdings that may not match your risk profile.

A useful way to frame it is:

If you had this amount in cash today, would you buy these exact investments?

If the answer is “no”, that doesn’t automatically mean “sell everything” — but it does mean you should treat inherited holdings like any other part of your portfolio and make sure they align with your goals.

Example (shares):
You inherit $120,000 of Australian bank shares. They may provide franked dividends, but also create concentration risk (one sector). A sensible approach might be:

• keep a portion if it suits your income needs, but
• gradually diversify into a broader portfolio if your long-term plan calls for it.

C. Inheriting Property

Property is where inheritance decisions can become emotionally charged — and tax outcomes can vary significantly depending on whether the property was a main residence or an investment.

Inherited main residence: CGT may be reduced or eliminated

Australia’s CGT rules can allow a main residence exemption in common circumstances, but timing and usage matter (e.g., whether it was producing income, when it’s sold, and other conditions).

If you’re considering selling an inherited home, it can be worth getting advice early, because the difference between “sell sooner” and “sell later” can materially change the CGT outcome.

If the property was rented (or you rent it out)

If you keep the property and rent it:

• rental income is taxable,
• some expenses may be deductible, and
• CGT on sale can be more complex depending on how the property has been used over time.

Stamp duty / transfer duty is state-based

Duty rules vary by state. Often, there is concessional treatment for transfers strictly “in accordance with the will”, but duty outcomes can change if beneficiaries:

• alter ownership proportions,
• buy each other out, or
• restructure ownership after the transfer.

Example (property decision):
You inherit a house worth $900,000. Keeping it as a rental sounds attractive, but ask:

1. Is the net cashflow (after rates, insurance, maintenance, agent fees) actually positive?
2. Would you choose this property today at today’s price?
3. What is the CGT position if sold now vs later?

That set of questions helps separate emotion (“we should keep it in the family”) from strategy (“is this the best asset for our plan?”).

D. Superannuation Death Benefits: often the biggest tax surprise

Super is frequently misunderstood because it may be paid outside the will and is taxed under specific rules.

Tax treatment depends on:

• whether the recipient is a tax dependant,
• the components of the benefit (tax-free vs taxable; taxed vs untaxed elements),
• whether it’s paid directly to a person or to the estate (and then to beneficiaries).

Practical takeaway: Two people can receive the same super death benefit amount and face very different tax outcomes depending on their relationship to the deceased and the benefit components. If super is involved, get specific advice.

What should you do with the funds? A clear decision framework

Rather than defaulting to “cash vs shares vs property”, a better approach is to make three decisions in order.

Decision 1: Stabilise your foundations

For accumulators and pre-retirees, the most valuable first step is often improving resilience:

• build/restore an emergency buffer,
• clear expensive consumer debt,
• ensure insurances and key estate planning items are up to date (beneficiaries/nominations, wills, powers of attorney).

This isn’t about maximising short-term returns — it’s about reducing the chance of a forced sale or bad decision later.

Decision 2: Decide the role of the inheritance in your plan

A few common “good uses”:

• accelerate retirement (invest for long-term growth),
• reduce risk (create a defensive buffer as retirement approaches),
• fund a known goal (home upgrades, education support, travel, helping family — ideally with boundaries and a plan).

Decision 3: Implement using a simple “3-bucket” model

This keeps decisions practical and reduces all-or-nothing thinking.

Bucket A — Cash (certainty + flexibility)

Used for:

• emergency buffer,
• near-term spending,
• any future tax bills you expect may arise.

Bucket B — Shares (growth + liquidity)

Used for:

• long-term goals (often 5+ years),
• diversification,
• inflation-beating growth over time.

Implementation tip: If markets feel uncertain, you can use staged investing (e.g., monthly over 6–12 months). This isn’t about predicting markets — it’s about making the plan emotionally sustainable so you stick to it.

Bucket C — Property (concentration + complexity)

Property can be a strong long-term asset, but it’s also:

• less liquid,
• more concentrated (one asset, one location),
• higher friction (maintenance, tenants, insurance, compliance),
• potentially complex for CGT and duty.

For many pre-retirees, property decisions are less about “return” and more about concentration risk and cashflow/effort.

Common mistakes (and how to avoid them)

Mistake 1: Selling before you understand CGT cost base

With shares and property, CGT outcomes can hinge on cost base rules and timing. Gather documents first, then decide.

Mistake 2: Keeping inherited assets out of guilt

Sentiment is normal. But your portfolio still needs to match your goals, timeframe and risk tolerance.

Mistake 3: Forgetting that estates can have income/tax reporting

If the estate earns income after death, there may be reporting requirements and beneficiaries may need statements from the executor.

Mistake 4: Assuming super death benefits are always tax-free

Super is its own category — and tax outcomes can differ significantly.

A practical “Inheritance Action Plan”

Week 1–2

• Keep funds quarantined (don’t rush).
• Start a “tax file” (valuations, statements, executor summaries).

Weeks 3–6

• Clarify the CGT and income tax picture.
• Decide what assets fit your plan and what doesn’t.
• Set aside a tax buffer.

Weeks 6–12

Build your bucket plan:

• Cash buffer finalised
• Staged investing plan (if appropriate)
• Property decision (keep/sell) with CGT/duty lens
• Confirm super death benefit tax outcomes (if applicable)

 

Closing thought

An inheritance is a financial opportunity — but it’s also a tax and structure event. The best outcomes usually come from slowing down, getting the paperwork right, setting aside a tax buffer, and then investing (or simplifying) in a way that supports your long-term plan — not short-term emotion or family pressure.

If you want, paste your preferred disclaimer and your firm’s call-to-action wording, and I’ll tailor the final paragraph and add two short “case study” callouts (one shares, one property) to make the article more engaging for website readers.

 

ATO – Deceased estates (overview):
https://www.ato.gov.au/individuals-and-families/deceased-estates

ATO – If you are a beneficiary of a deceased estate:
https://www.ato.gov.au/individuals-and-families/deceased-estates/if-you-are-a-beneficiary-of-a-deceased-estate

ATO – Doing trust tax returns for the deceased estate:
https://www.ato.gov.au/individuals-and-families/deceased-estates/doing-trust-tax-returns-for-the-deceased-estate

ATO – Doing a final tax return for the deceased person:
https://www.ato.gov.au/individuals-and-families/deceased-estates/doing-a-final-tax-return-for-the-deceased-person

ATO – Cost base of inherited assets (CGT):
https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/inherited-assets-and-capital-gains-tax/cost-base-of-inherited-assets

ATO – Inherited property and CGT:
https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/inherited-assets-and-capital-gains-tax/inherited-property-and-cgt

ATO – Extensions to the 2-year ownership period (inherited property CGT):
https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/inherited-assets-and-capital-gains-tax/extensions-to-the-2-year-ownership-period

ATO – Paying superannuation death benefits (super professionals, tax/components guidance):
https://www.ato.gov.au/tax-and-super-professionals/for-superannuation-professionals/apra-regulated-funds/paying-benefits/paying-superannuation-death-benefits

Revenue NSW – Deceased estate transfers (transfer duty):
https://www.revenue.nsw.gov.au/taxes-duties-levies-royalties/transfer-duty/deceased-estate

Important information and disclaimer

The information provided in this document is general information only and does not constitute personal advice. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser. From time to time we may send you informative updates and details of the range of services we can provide.

FinPeak Advisers ABN 20 412 206 738 is a Corporate Authorised Representative No. 1249766 of Spark Advisers Australia Pty Ltd ABN 34 122 486 935 AFSL No. 458254 (a subsidiary of Spark FG ABN 15 621 553 786)