Inheriting a property overseas does not automatically trigger a tax liability in Australia. Generally, there is no tax payable at the time of inheritance. However, if you later sell the inherited property, you may be subject to Capital Gains Tax (CGT) in Australia—regardless of where the property is located—because Australian tax residents are taxed on their worldwide income and capital gains.
The capital gain is typically calculated based on the market value of the property at the date of inheritance. If you sell the property for more than this value, the gain must be reported in your Australian tax return.
If you hold the inherited property for more than 12 months before selling it, you may be eligible for the 50% CGT discount, which can significantly reduce your taxable capital gain. This discount is available to Australian tax residents for assets held longer than one year, including foreign real estate.
It’s important to note that while some countries impose inheritance or estate taxes, these are generally not creditable against your Australian CGT liability unless they are directly related to capital gains. Each situation can vary depending on the local laws of the country where the property is located and whether any double taxation agreements apply.
Due to the complexity of international estate and tax laws, it’s strongly recommended that you seek professional advice to ensure you’re meeting your obligations and making the most of any tax concessions available.
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