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Australia is on the verge of an enormous transfer of wealth. Over the next two decades, Baby Boomers will pass on an estimated $5.4 trillion in assets to younger generations, reshaping how Australians approach tax, superannuation, and retirement planning.
Understanding how inheritance interacts with your superannuation and tax strategy is essential to ensuring your wealth is managed efficiently. This article explores the tax treatment of inherited assets, the impact of the upcoming 2026 tax changes, and how you can align your inheritance and super to build sustainable generational wealth.
Super and Inherited Assets: Getting the Rules Right
Superannuation is one of the most misunderstood components of estate and inheritance planning. When a super fund pays a death benefit, the tax outcome depends on who receives it.
If the payment goes to a tax dependent, such as a spouse or a child under 18, it is tax-free. However, if the payment is made to a non-dependant, the taxed element of the super is taxed at 15% and the untaxed element is taxed at 30%, plus the Medicare levy.
Self-Managed Super Funds and Nominations
For members of self-managed super funds (SMSFs), it is crucial to have binding death benefit nominations or reversionary pensions in place. These ensure that benefits are directed to the intended beneficiaries and not left to the trustee’s discretion, which could delay distribution or cause disputes.
Estate and Super Alignment
Many Australians fail to align their superannuation death nominations with their estate planning documents. Because super usually sits outside the estate, this misalignment can cause unintended outcomes, such as unequal distributions or tax inefficiencies.
The Australian Taxation Office has increased compliance scrutiny on super funds after a member’s death, reinforcing the need to ensure super, estate, and trust structures are coordinated.
Speak to a financial adviser to review your SMSF deed and nominations regularly, particularly after major life changes such as marriage, divorce, or business restructuring.
The Proposed Tax Cuts from 1 July 2026: What They Mean for You
The Australian Government’s Budget 2024–25 confirmed significant tax reforms that will reshape the financial landscape for high-income earners and retirees.
What’s Changing
From 1 July 2025, earnings on super balances above $3 million will attract an additional 15% tax, increasing the effective rate on that portion to 30%.
From 1 July 2026, stage-three tax changes will flatten personal income tax brackets, lowering the 37% marginal rate and broadening access to middle-income relief. These measures are intended to simplify the tax system and encourage saving and investment.
What This Means for Retirees and Inheritors
Retirees with large super balances may face higher taxation on earnings, reducing their net returns. Meanwhile, flatter income tax rates could benefit those drawing income from inherited assets or super pensions.
Now is the ideal time to model your tax exposure and explore contribution or reallocation strategies ahead of the 2026 changes.
Speak to an adviser to understand how the reforms could affect your retirement income strategy.
How Inherited Capital Can Reshape Your Tax Posture
While Australia has no formal inheritance tax, inherited assets can still trigger tax obligations under certain conditions. When an inherited property or investment is later sold, Capital Gains Tax (CGT) may apply.
Key Tax Considerations
Capital Gains Tax
If an inherited property was the deceased’s main residence, CGT can generally be disregarded if the property is sold within two years of the person’s death.
Income Impacts
A significant inheritance could push your taxable income into a higher bracket or affect your eligibility for means-tested benefits, including the Age Pension.
Super Contribution Opportunities
Inherited funds can be used for non-concessional contributions or downsizer contributions of up to $300,000 for individuals aged 55 or older, providing a tax-efficient way to grow retirement savings.
Portfolio Rebalancing
Inheritance may skew your asset allocation. Strategic reallocation through super contributions or family trust structures can improve diversification and reduce tax exposure.
Review your overall investment position after receiving an inheritance to ensure long-term efficiency and compliance with contribution limits.
Integrating Legacy into Your Retirement Plan
An inheritance can dramatically alter your retirement outlook. The challenge lies in integrating it strategically into your financial plan.
Smart Uses of Inherited Wealth
- Boost Super Balances: Redirect inherited funds to your super for concessional tax treatment.
- Debt Reduction: Use capital to clear high-interest or investment debt to free up future income.
- Income Generation: Reinvest in diversified income-producing assets for a reliable retirement stream.
- Structured Gifting: Consider lifetime gifting to family members for control and reduced estate complexity.
Using Testamentary Trusts
A testamentary trust, created through a will, can hold assets for beneficiaries while offering flexibility and protection against tax and liability.
Regularly review your legacy plan to ensure it remains aligned with changing laws and family needs.
How Navigate Coordinates Tax, Super and Estate Planning
At Navigate Financial, we provide a holistic, coordinated approach to help you align your superannuation, tax planning, and estate strategy.
Our Approach
- Integrated Planning: We combine financial planning, tax management, and estate coordination under one framework.
- Collaboration: Our advisers work closely with accountants and lawyers to ensure your wealth structures are compliant and efficient.
- Scenario Modelling: We analyse the potential impact of inheritance, tax reform, and cash flow on your retirement outcomes.
- Tailored Advice: Whether you have inherited super, property, or business assets, we design strategies specific to your situation.
Book a no-cost consultation to see how coordinated advice can simplify your financial life and enhance your retirement strategy.
Frequently Asked Questions (FAQs)
- Is inheritance taxable in Australia?
Australia does not have an inheritance tax, but beneficiaries may incur Capital Gains Tax when they sell inherited property or shares. - How are superannuation death benefits taxed?
Super death benefits paid to dependants are tax-free. Payments to non-dependants are taxed up to 30% plus the Medicare levy. - What are the key tax changes coming in 2026?
From July 2025, a 30% t tax applies to earnings on super balances above $3 million. In 2026, income tax brackets will flatten, reducing the 37% rate and simplifying the tax system. - How can I minimise tax on an inheritance?
You can reduce exposure by contributing to a super, using trusts, or selling inherited property within the two-year CGT exemption window. - Why is it important to align tax, super, and estate planning?
Because each affects the other. Integrating them creates tax efficiency, protects assets, and simplifies wealth transfer across generations.
