Australia Estate Planning Tax Guide
Australian estate planning tax rules. The guide covers: the wills and the estate planning — the 'will' is the 'legal document' that 'directs the distribution of the estate assets' after the death; the 'estate planning' includes: (i) the 'will preparation', (ii) the 'selection of the executor', (iii) the 'tax-effective distribution of the assets', (iv) the 'planning for the superannuation death benefits', (v) the 'establishment of the testamentary trusts'; the 'estate planning' is 'essential for the 'tax minimisation' and the 'asset protection' for the 'beneficiaries'; the testamentary trusts — the 'testamentary trust' is the 'trust created under the will' — the 'testamentary trust 'takes effect on the death of the testator''; the 'testamentary trust' provides the 'tax benefits' — the 'income of the testamentary trust' is 'taxed at the 'individual rates' (the 'progressive rates' with the '$18,200 tax-free threshold') and the 'trust income can be 'streamed' to the 'beneficiaries' in the 'tax-effective manner'; the 'testamentary trust' also provides the 'asset protection' (the 'trust assets are 'protected from the creditors' and the 'claims of the ex-spouses'); the 'testamentary trust' is 'more tax-effective' for the 'minor beneficiaries' (the 'children under 18') — the 'children can receive the income from the testamentary trust at the 'adult tax rates' (the 'higher tax-free threshold' and the 'lower rates' compared to the 'unearned income of the minors'); the superannuation death benefits — the 'superannuation death benefits' are the 'superannuation benefits paid to the 'beneficiaries' on the 'death of the member'; the 'super death benefits' are 'tax-free' if paid to the 'dependants' (the 'spouse', the 'children under 18', the 'financial dependants', and the 'interdependent dependants'); the 'super death benefits' paid to the 'non-dependants' are 'taxed at the 15% (the element taxed) or the 30% (the element untaxed) plus the 2% Medicare levy'; the 'binding death benefit nomination (the 'BDBN')' is 'recommended' to 'direct the super death benefits to the intended beneficiary'; the CGT on the death and the estate planning — the 'CGT on the death' — the 'death of the person does NOT trigger the CGT' (the 'CGT rollover under the Section 128-15 of the ITAA 1997'); the 'beneficiary 'acquires the asset at the deceased's cost base''; the 'CGT on the 'sale of the inherited assets' — the 'beneficiary who 'sells the inherited asset' pays the 'CGT on the 'capital gain from the date of the death''; the 'main residence CGT exemption' — the 'inherited home that is 'sold within 2 years of the death' may be 'exempt from the CGT' (the '2-year CGT exemption rule' for the 'deceased estates').
Testamentary Trusts
- Trust created under the will: The 'testamentary trust takes effect on the death of the testator'.
- Tax benefits: The 'income is taxed at the individual rates' and the 'streaming to the beneficiaries'.
- Minors concession: The 'children under 18' 'receive the income at the adult tax rates'.
For the inheritance and the estate tax rules, see our Inheritance & Estate Tax Guide →.
Super Death Benefits
- Tax-free to dependants: The 'super death benefits to the spouse and the children under 18' are 'tax-free'.
- Taxed to non-dependants: The 'super death benefits to the adult children' are 'taxed at 15% to 30% plus the 2% Medicare levy'.
- Binding nomination (BDBN): The 'BDBN' 'directs the super benefits to the intended beneficiary'.
For the superannuation death benefits and the super rules, see our Superannuation Guide →.
CGT on Inherited Assets
- No CGT on death: The 'CGT rollover on the death' — the 'beneficiary inherits the cost base'.
- 2-year main residence exemption: The 'sale of the inherited home within 2 years' may be 'CGT-exempt'.
For the CGT rules and the main residence exemption, see our Capital Gains Tax Guide →.