Many find inheritance tax a burden, as they have to deal with the stresses of taxation laws. However, the joy brought about by the whole process of being a success is out of this world.
As an Australian living in Australia, it’s always important to be aware of potential implications imposed on matters dealing with inheritance taxes.
Our blog post focuses on helping you better understand inheritance taxes and other related issues. Let’s get into it.
Understanding estate inheritance taxes in Australia
You might wonder, “Is there an inheritance tax in Australia?”
Even though Australia abolished inheritance taxes, some states and territories in Australia levy estate taxes. This means once a person dies, their estate will be subjected to taxation.
While there isn’t a direct inheritance tax in Australia, other taxes, such as capital gain tax (CGT) and superannuation death benefit taxes, could impact one’s inheritance.
Knowing these taxes will help you save properties and other assets left to you by your loved ones.
How to minimize inheritance taxes in Australia
Knowing the ins and outs of inheritance law and devising good plans and strategies can help you keep costs down.
Here are some of the things you can do to minimize these costs;
1. Gifting
Impress your loved ones/beneficiaries by giving them substantial gifts during your lifetime.
This will help reduce the value of your estate, which may be subjected to taxes.
You must keep records and documents of all gifts for taxation purposes and proofs.
2. Leverage trust structures
Consider having a family or testamentary trust to help manage and distribute inheritance amongst beneficiaries while minimizing taxes.
The trusts chosen can help safeguard assets from CGT until sold and reduce overall tax liabilities.
It is also safer to get advice from a professional lawyer who will guide you or a tax advisor, i.e., KSH TAX, to help choose the proper trust structure.
3. Estate planning
Planning by appointing a trusted individual to manage your financial affairs will help in matters dealing with estate planning.
Draft a will help ensure that your assets are well distributed, to minimize potential fights over tax complications.
If you are a minor, consider opting for a designated guardian who will ensure they are well taken care of.
4. Plan for superannuation inheritance taxes
You can always plan smart by minimizing the tax accompanied by superannuation inheritance by doing the following;
- Withdrawing funds before death, which you will receive tax-free.
- Nominating dependents as beneficiaries to help cut taxation costs.
5. Understand capital gains tax on inherited properties.
When you sell inherited property, you may usually be subject to capital gains tax.
But what should you do to minimize these expenses? You must keep all the records of the property’s acquisition and valuation at the time of inheritance.
Also, you may be qualified for a full CGT exemption if the deceased inherited property was the primary residence and is sold within two years.
Summary
Research and look for updates to help ensure your inheritance tax plan remains compliant and effective with relevant authorities.
You can also keep up by seeking professional advice to help you plan better and minimize taxation.
If you need tailored assistance and advice with your inheritance tax, do not hesitate to contact us.
Let us help you comply with Australia’s inheritance and estate laws.
