Australia does not have an inheritance tax or death duties, and that has not changed. But the 2026–27 Federal Budget introduced the biggest changes to capital gains tax in decades, along with a new minimum tax on discretionary trusts. Both affect how much tax families pay when they later sell inherited assets, and how Wills with trusts should be drafted.
This article sets out the position as at October 2026. Parts of the reform are already law; other parts are still before Parliament and may change.
1. Capital gains tax: the 50% discount is being replaced
Legislation passed in June 2026 changes how capital gains are taxed for individuals, trusts and partnerships. For gains that accrue from 1 July 2027:
- the general 50% CGT discount is replaced by indexation of the cost base for inflation; and
- a minimum tax of 30% applies to the real (inflation-adjusted) gain.
Gains that accrued before 1 July 2027 keep the existing 50% discount. This means many assets will have their gain split into two periods, before and after that date. A valuation as at 30 June 2027 may become important evidence.
The main residence exemption is not affected.
2. “Pre-CGT” assets lose their full exemption
Assets acquired before 20 September 1985 have always been free of CGT. Many older Australians, and the estates they leave, hold such assets. Under the new law, growth up to 1 July 2027 remains exempt, but growth after that date will be taxable. Families who expected a parent’s pre-1985 property or shares to be completely tax-free on a future sale should revisit that assumption.
3. What happens to inherited assets?
The existing rule that no CGT is triggered at the moment of death, with the beneficiary generally inheriting the deceased’s cost base, continues. The tax arises when the beneficiary or executor later sells. Whether the old or new rules apply, or a mix of both, depends on when the asset was acquired and when it is sold.
Treasury has also proposed an exclusion from the 30% minimum tax for qualifying gains made through deceased estates and genuine testamentary trusts. The detail of that exclusion should be confirmed before any decision is made.
For overseas beneficiaries, the position is different again. Foreign residents are taxed differently from Australian residents on Australian property, and the rules for foreign residents have also recently been tightened.
4. A new minimum tax on discretionary trusts from 2028
The Government has introduced Bills (on 14 October 2026) to impose a minimum 30% tax on the net income of discretionary trusts from 1 July 2028. These Bills are not yet law.
Deceased estates are excluded, and so are testamentary trusts established for genuine testamentary purposes. The exclusion comes with conditions, including limits on who the trust may benefit. Commentators have warned that some existing testamentary trust Wills may not meet these conditions as currently drafted.
What should you do now?
- Do not rush to sell or restructure. Decisions driven only by tax often create other problems.
- Keep good records. Purchase documents, improvement costs and, where relevant, a valuation as at 30 June 2027 will matter to whoever eventually sells the asset.
- Have testamentary trust Wills reviewed once the trust legislation is finalised, to check they still qualify for the exclusion.
- Coordinate legal and tax advice. Estate planning and tax planning now need to be done together, especially for families with assets in more than one country.
How Chua Tan Associates can help
We work alongside clients’ accountants to review Wills, testamentary trusts and property holdings in light of these changes, including for families who live overseas or have beneficiaries abroad. We advise in English, Mandarin and Cantonese.
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Chua Tan Associates acts for families, executors, trustees and their professional advisers in estate planning, estate administration and estate disputes in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal or tax advice. Victorian law unless stated otherwise.
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