Inheriting Property from Parents Australia: Complete Guide

When you learn you've inherited a property from your parents in Australia, it's often a deeply bittersweet and overwhelming moment. On one hand, it’s a significant financial inheritance. On the other, it arrives during a time of grief and comes with a sudden weight of responsibility. The silver lining is that Australia doesn't have a direct inheritance tax, but there are still some crucial first steps you need to navigate.

What to Do First When Inheriting a property from parents Australia

Family members gathered at home to go over inheritance paperwork after a loved one’s passing in Australia.

The initial hours and days after the news are often a blur of emotion and logistics. The most important thing is to give yourself space to grieve. While you do that, there are a few simple, practical steps you can take to secure the property and get a handle on your new role.

To make things a bit clearer during this tough time, here’s a quick summary of the immediate actions you’ll need to think about.

Initial Checklist for Inheriting Property

Action Item	Why It's Important	Who Is Responsible
Locate the Will	It's the core legal document that names the executor and beneficiaries, dictating who manages the estate and who inherits it.	Executor or family solicitor.
Secure the Property	Ensures the asset is protected from unauthorised access or damage. Think locks, alarms, and general security.	The Executor.
Notify Insurers & Utilities	Keeps the home insurance policy valid and manages ongoing bills to prevent service disruptions or debts from accumulating.	The Executor.
Redirect Mail	Prevents mail from piling up, which can be a security risk, and ensures important documents are received.	The Executor.
Understand Ongoing Costs	Clarifies that estate funds, not personal funds, cover expenses like rates and bills until the property title is transferred.	Beneficiaries should be aware, but the Executor manages the payments.

This checklist provides a high-level overview. Now, let’s unpack what each of these steps really involves.

Find the Will and Pinpoint the Executor

First things first: you need the Will. This is the single most important document, as it names the executor—the person legally tasked with managing the deceased's estate. It also identifies the beneficiaries, who are the people set to inherit the assets.

It’s vital to understand this distinction. The executor holds the legal authority to make decisions while the estate is being administered. If that’s you, your duties begin right away. If someone else is the executor, your job as a beneficiary is to stay in the loop and cooperate with their requests for information.

Take Immediate Steps to Protect the Property

Once the executor is confirmed, they need to act quickly to safeguard the property. This isn't just about locking the door; it's about protecting a major asset of the estate.

Key actions include:

• Securing the premises: Check that all doors and windows are securely locked. It's often a good idea to change the locks, especially if keys are unaccounted for.

• Notifying crucial parties: You must inform the home insurance company about the owner's passing to make sure the policy remains active. You'll also need to get in touch with utility providers (electricity, water, gas) to update them on the situation.

• Handling the mail: Arrange for Australia Post to redirect all mail to the executor’s address. A pile of uncollected letters is a clear signal that a house is unoccupied.

One of the biggest, and often most emotional, tasks is dealing with the contents of the home. Using a thorough estate cleanout checklist can be a massive help in breaking down this overwhelming job into manageable steps.

Get a Grip on Costs and Financial Duties

A common source of confusion is who foots the bill for ongoing costs like council rates, utilities, and insurance before the property officially changes hands. These expenses are typically paid from the deceased's estate funds, which are managed by the executor.

Beneficiaries are not usually expected to pay for these things out of their own pocket until the estate administration is complete and the property title is transferred into their name.

A huge financial relief for beneficiaries is that Australia got rid of all inheritance and estate taxes by 1979. While you won't pay a tax on the inheritance itself, keep in mind that future decisions—like selling the property—can trigger Capital Gains Tax (CGT). This is a critical point to understand from the outset.

Navigating Probate and Property Title Transfers

Once you've handled the immediate responsibilities, the more formal legal side of inheriting a property in Australia kicks in. This part of the journey involves official processes to legally confirm the Will and transfer ownership of the property over to you. It's a structured path, but it can feel pretty overwhelming if you’ve never done it before.

It all starts with a critical legal document called the Grant of Probate. Think of this as an order from your state or territory's Supreme Court that officially recognises the Will as valid. It also confirms the executor's authority to manage the deceased person's estate. Without probate, big institutions like banks and land registries simply won't let the executor touch or transfer major assets, and that definitely includes real estate.

Essentially, probate is the key that unlocks the estate. It gives the executor the legal power to act on behalf of the person who has passed away. To get it, the executor has to submit the original Will, the death certificate, and a full list of the estate’s assets and debts to the court. This process ensures the Will is the final, correct version and that the named executor has the right to move forward.

Obtaining a Grant of Probate

Applying for probate is a very methodical process. The first thing the executor must do is publish a notice of their intention to apply. This gives any potential creditors or people who might want to challenge the Will a chance to come forward. After a short waiting period, usually about 14 days, the formal application can be lodged with the Supreme Court.

This application includes a detailed affidavit from the executor, which needs to cover:

• The deceased's details and proof of their death.

• The original Will and where it's being held.

• A comprehensive list of all assets (like property, bank accounts, and shares) and liabilities (mortgages, loans, and bills).

The court will then review the application to make sure everything is in order. If it's all approved, the Grant of Probate is issued. From that moment on, the executor can legally start distributing the estate according to the instructions left in the Will.

The Importance of Property Valuation

Before the title deeds can be officially transferred, the property has to be valued. This isn't just a box-ticking exercise; it's a crucial step with serious legal and tax consequences. The valuation establishes the property's market value at the date of the person's death.

This figure is incredibly important because it becomes the new "cost base" for the property for Capital Gains Tax (CGT) purposes. It's highly recommended to get a professional, independent valuation from a registered valuer. It ensures accuracy and helps you avoid any potential headaches with the Australian Taxation Office (ATO) later on.

Here’s a real-world scenario: Let's say Sarah inherits her mother's house. Her mum bought it way back in 1990. The executor organises a formal valuation, which sets the property's market value at $850,000 on the date her mother passed away. If Sarah decides to sell the house a year later for $900,000, her potential capital gain would be calculated on the $50,000 difference—not on the original purchase price from decades ago.

This valuation gives a clear financial snapshot for the estate and is absolutely essential for correctly handling any tax matters that might pop up.

A clear breakdown of the three legal steps required to transfer inherited property in Australia.

As you can see, the path from inheritance to ownership follows a clear legal sequence. It starts with the Will, moves through the court system with probate, and is finalised with the official land registry.

Transferring the Property Title

With the Grant of Probate in hand, the final major step is to transfer the property's title from the deceased's name into the beneficiary's name. This process is handled by the relevant Land Titles Office in your state (for example, Land Use Victoria or NSW Land Registry Services).

The executor lodges the required forms, which always include the Grant of Probate and a formal transfer document. If there's an existing mortgage on the property, the executor will need to work with the bank to have it discharged—usually by paying it out from the estate's funds—before the title can be transferred free and clear.

If the estate is considered a foreign resident for tax purposes, you might face some specific requirements.

Once the application is processed and approved, the Land Titles Office updates its records. Just like that, you, as the beneficiary, are now the legal owner of the property. This wraps up the formal legal transfer, giving you the authority to decide what's next—whether that's selling it, renting it out, or moving in and making it your new home.

Understanding Capital Gains Tax on Inherited Property

When you find yourself inheriting property from parents in Australia, the first thing most people worry about is inheritance tax. The good news? We don't have one. The real financial hurdle you need to get your head around is Capital Gains Tax (CGT).

This is the tax that kicks in when you sell or "dispose of" an asset. Getting a handle on your CGT obligations right from the start is absolutely crucial, as it will shape your decisions and ultimately determine your financial outcome. The rules can feel a bit tangled, but they usually boil down to two key questions: Was this property your parents' main home? And what are you going to do with it now?

The Main Residence Exemption

Your most valuable tool for minimising tax is the main residence exemption. If you play your cards right, this provision can let you sell an inherited home completely tax-free. But, you have to meet some strict conditions.

To qualify for a full exemption, this generally needs to be the situation:

• The property was your parent's main home (their principal place of residence) and was never used to earn income, like being rented out, just before they passed away.

• You sell the property within two years of their death.

This two-year window set by the Australian Taxation Office (ATO) is a firm deadline. It's designed to give you a reasonable amount of time to get the estate sorted and sell the home without a tax penalty. If you hold on to the property for longer than two years before selling, you’re likely looking at a partial CGT bill, calculated from the date of death.

Demystifying the Property's Cost Base

To figure out any potential CGT, you first need to establish the property's cost base. This is the starting value the ATO uses to calculate your capital gain (or loss). For an inherited property, the cost base isn't what your parents paid for it. It all depends on when they bought it and how it was used.

Here’s the breakdown:

• Property bought before 20 September 1985 (pre-CGT): The cost base is simply the property's market value on the day your parent passed away. This is exactly why getting a formal valuation during the probate process is non-negotiable.

• Property bought on or after 20 September 1985 (post-CGT): The cost base is carried over from your parent. It's what their cost base was at the time of their death, which includes the original purchase price plus costs like stamp duty and any major improvements they made.

Key Takeaway: The single biggest factor setting your cost base is whether your parents bought the property before or after the introduction of CGT in 1985. This one fact can shift your tax outcome by tens, or even hundreds, of thousands of dollars.

Calculating Your Potential Capital Gains Tax

Let's run through a quick, real-world scenario. You inherit your father's house. He bought it in 2005 and it was his main residence right up until he died. At his date of death, the market value is $1,000,000.

Now, your decision is what matters.

• Scenario 1: You Sell Within Two Years You finalise the estate and sell the property 18 months later for $1,050,000. Because you met the conditions for the main residence exemption, that $50,000 capital gain is completely ignored. You pay zero CGT.

• Scenario 2: You Rent It Out, Then Sell Instead, you decide to rent the property out for a few years. The moment you do this, you're using it to produce income, which means the full main residence exemption is off the table. Your cost base for CGT purposes is "reset" to the market value at the time you first listed it for rent. From that day forward, any increase in value is subject to CGT when you eventually sell.

CGT can be tricky, especially when rental income is involved. For a more detailed look at these rules, have a read of our guide on capital gains and rental properties.

To help clarify how different choices affect your tax, here’s a quick comparison of common CGT scenarios you might face.

CGT Scenarios for Inherited Property

Scenario	CGT Implications	Key Considerations
Sell Within 2 Years (Main Residence)	Full CGT exemption is likely. No tax on the capital gain.	Property must not have been used to produce income. The 2-year deadline is strict.
Hold Past 2 Years, Then Sell	Partial CGT applies. The gain is calculated from the date of death to the sale date.	You lose the full exemption. The 50% CGT discount may apply if held for over 12 months.
Move In & Make It Your Home	You can continue the main residence exemption indefinitely.	If you sell later, you won't pay CGT. You can't claim another property as your main residence.
Rent It Out Immediately, Then Sell	Full CGT applies from the date you inherited it. The cost base is the market value at the date of death.	The main residence exemption is lost. You can claim rental expenses as deductions.

As you can see, your actions as the beneficiary have a direct and significant impact on the tax outcome.

This topic is more relevant than ever. We're in the middle of what experts call the "great wealth transfer" in Australia, with Baby Boomers starting to pass on significant property assets. As these inheritances pick up speed, knowing the tax rules is vital for beneficiaries.

Your Options: Sell, Rent, or Live In The Property

Once probate is granted and the property title is officially in your name, you’ve cleared the legal hurdles. But now you’re standing at a major crossroads, facing a decision that’s as much about emotion as it is about finance.

What you choose to do next—sell the home, rent it out, or move in yourself—will have lasting effects. Each path comes with its own rewards and challenges. Let's break down what each option really looks like on the ground so you can make a clear-headed choice that fits your life.

Option 1: Selling the Inherited Property

For many, selling is the cleanest and most direct route. It turns a complex, emotional asset into cash, which makes it much simpler to divide the proceeds if you’ve inherited the property with siblings or other family members.

But selling isn’t just about sticking a ‘For Sale’ sign out the front. To get the best price, you’ll need to get the property market-ready. This could mean anything from a fresh coat of paint and some decluttering to more significant repairs or professional staging. Thinking about different strategies to add value to an inherited property can make a real difference to your final sale price.

The biggest financial factor here is, without a doubt, Capital Gains Tax (CGT). If the house was your parents' main residence and you manage to sell it within two years of their passing, you can often avoid CGT altogether. Step outside that two-year window, however, and the tax bill can be significant. Timing is everything.

Option 2: Renting Out the Property

Deciding to become a landlord can be a brilliant move. Renting out the property creates a steady, passive income stream and allows you to hold onto a valuable asset that will likely grow in value over the years. Essentially, your tenants help pay for its upkeep.

But don’t underestimate the work involved. Being a landlord comes with serious legal duties. You are responsible for:

• Ensuring the property meets all health and safety standards.

• Handling the tenancy agreement and bond correctly.

• Responding to maintenance and repair requests quickly.

From a financial standpoint, you have to balance the potential rental income against the ongoing costs—landlord insurance, council rates, water bills, and property management fees if you go that route. And, of course, all rental income must be declared on your tax return.

Key Insight: The huge upside to renting is the ability to claim tax deductions. Many of the property's running costs can be offset against your rental income, which can seriously reduce your overall tax bill. Knowing what you can claim is vital to making it a profitable venture.

For a complete rundown of claimable expenses, have a look at our detailed guide on tax deductions for rental property. It’s a must-read if you’re considering this path.

Option 3: Moving In and Making It Your Home

This is often the choice driven by the heart—moving in and making the family house your own. It can be a wonderful way to hold onto a place full of memories while also living in a home without a mortgage (or at least a much smaller one).

By making the property your main residence, you also get a major tax advantage. You can extend the CGT exemption, meaning if you live in it as your primary home and sell it down the track, any capital growth during that time is generally tax-free.

But this decision goes beyond tax breaks. You have to be realistic. Does the house’s location, size, and layout actually suit your life right now? Does it work for your job, your family, or your long-term plans? It can also get complicated if you already own a property, as you can only have one main residence for tax purposes at any given time.

Beyond the big, life-altering decisions of selling, renting, or moving in, the reality of inheriting property from parents in Australia brings a host of immediate financial and family matters to the table. Let's be honest, the period while the estate is being sorted out can be a minefield of surprise costs and, when siblings are involved, potential disagreements.

House keys on a property blueprint represent the transfer of inherited real estate in Australia.

It’s crucial to get a handle on who pays for what, and when. Before the property's title is officially in your name, it's the deceased's estate that covers all the holding costs. The executor will use funds from the estate to pay for things like council rates, water bills, insurance, and any mortgage payments. You shouldn’t have to pay for these out of your own pocket during this initial phase.

Navigating Day-to-Day Property Expenses

Once the property is legally yours, those financial responsibilities land squarely on your shoulders. You absolutely need a plan to manage them, because they can add up faster than you’d think.

• Home and Contents Insurance: This is completely non-negotiable. Get the policy transferred to your name the moment you can to ensure there are no gaps in coverage.

• Council and Water Rates: These are recurring bills that must be paid. Get in touch with the local council and water authority to update the ownership details as soon as possible.

• Utilities: Services like gas, electricity, and internet need to be either moved into your name or disconnected if the property is going to be sold or left vacant.

• Existing Mortgage: If there’s a mortgage on the home, it needs to be addressed. Usually, the loan is paid out by the estate. But if there aren't enough funds, you'll either have to refinance the loan in your name or sell the property to clear the debt.

Mapping out a clear budget for these outgoing costs is the very first step toward taking control of your inherited asset.

The sheer scale of wealth changing hands is staggering. A Forbes Australia report highlights that Australians are set to inherit a staggering amount in 2024 alone, with a massive chunk of that being property. As this trend grows, understanding both the financial and family side of things is more critical than ever.

Strategies for Inheriting with Siblings

When you inherit a property with your siblings, you all become co-owners. This shared responsibility can be a great source of support, but it can also spark serious conflict. The only way to navigate this successfully is with clear, open, and early communication to find a fair outcome for everyone and keep family relationships from fracturing.

It’s completely normal for disagreements to pop up. Siblings often have different financial situations or different emotional ties to the family home. One might see the property as a much-needed financial boost and want to sell quickly, while another might feel a deep sentimental attachment and want to keep it.

Here are the three most common ways to resolve these differences:

1. Agree to Sell and Split: This is often the cleanest and most straightforward path. The property is sold, and the money is divided according to the shares laid out in the Will. It provides a clean financial break for everyone.

2. Organise a Buyout: If one sibling is passionate about keeping the property, they can offer to buy out the others. This isn't just a casual chat; it requires a formal property valuation to set a fair market price for each share. The sibling who wants the house will then need to secure their own financing to complete the buyout.

3. Become Co-Landlords: If everyone agrees to hold onto the property as an investment, renting it out is a solid option. This absolutely must be backed by a formal partnership agreement. It should clearly define how you'll share costs, profits, and day-to-day responsibilities to prevent arguments down the track.

No matter which path you take, getting professional legal and financial advice is non-negotiable. It ensures any agreement you make is formalised and legally binding, protecting everyone involved and helping to preserve your family relationships through a tough time.

Common Questions About Inheriting Property in Australia

When you find yourself inheriting property from parents in Australia, it's natural for a flood of questions to come up. The legal and tax side of things can feel like a maze of "what if" scenarios, often leaving you feeling pretty uncertain. Let's walk through some of the most common queries we get from clients in this exact situation and give you some clear, straightforward answers.

How Long Do I Have to Sell an Inherited Property to Avoid Capital Gains Tax?

This is, without a doubt, one of the first and most critical questions people ask. The short answer is that the Australian Taxation Office (ATO) generally gives you a two-year window to sell an inherited property and potentially avoid paying any Capital Gains Tax (CGT).

But, and this is a big but, it's not a free pass. This rule comes with some very strict conditions attached:

• The property must have been your parent's main residence right up until they passed away.

• Crucially, it must not have been used to produce income, like being rented out, when they died.

• You, or the executor handling the estate, need to have the contract of sale finalised within two years of the date of death.

If you tick all these boxes, any capital gain from the sale is usually fully exempt from CGT. Think of it as the ATO’s way of giving families a fair amount of time to sort out the estate during a difficult period without the added stress of a tax bill.

What if there are delays? Life happens, and the ATO knows this. They can grant an extension to the two-year rule if you're held up by circumstances genuinely outside your control. This could be anything from a contested Will that puts probate on hold to other legal hurdles preventing the sale. You have to formally apply for this discretion, though—it’s not automatic.

What Happens If I Inherit a Property with a Mortgage?

Inheriting a house doesn't mean the mortgage suddenly appears on your credit file. However, the debt itself doesn't just disappear; it has to be settled. The outstanding home loan is considered a liability of the deceased's estate.

The executor is the one responsible for clearing this debt. They’ll typically use funds from the estate—like cash from bank accounts, proceeds from selling other assets, or a life insurance payout—to pay off the mortgage before the property title is officially transferred into your name.

If there isn't enough cash in the estate to cover the loan, you're usually looking at a couple of options:

1. Refinance the loan: You can apply for a new home loan in your own name to pay out the old one and keep the property.

2. Sell the property: The house can be sold, with the proceeds first going to clear the mortgage. Any money left over is then distributed to the beneficiaries.

The most important first step is for the executor to get in touch with the lender straight away to find out the exact balance and talk through the path forward.

Can I Claim Deductions for Expenses on the Inherited Property?

This one comes down entirely to what you decide to do with the house. Your ability to claim tax deductions is tied directly to whether the property is being used to generate taxable income.

If you decide to rent out the property, it effectively becomes an investment. In that scenario, you can absolutely claim deductions for a whole host of ongoing expenses against your rental income. Our detailed guide on Your Guide to Rental Property Tax Deductions breaks this down completely, but some common claims are:

• Council and water rates

• Landlord insurance

• Interest on any loan you take out for the property

• Repairs and maintenance costs

• Property management fees

On the flip side, if you choose to live in the house as your main residence or just leave it vacant while you prepare it for sale, those holding costs are not tax-deductible. It's not all bad news, though. These expenses can often be added to the property's cost base, which helps lower your CGT liability if and when you do sell it down the track.

Do All Siblings Have to Agree to Sell an Inherited Property?

When a property is inherited jointly with siblings, things can get complicated fast. How decisions are made really depends on the legal structure of your co-ownership.

Most of the time, you'll inherit the property as ‘tenants in common’. This means each sibling owns a specific, separate share (like 50/50 or a third each). While you each own your slice of the pie, a big decision like selling the whole house requires everyone to be on board. All co-owners have to agree.

So what happens if one sibling is keen to sell but the others want to hold on? There are a few ways this can play out:

• A Buyout: The siblings who want to keep the house can offer to buy the share of the sibling who wants out. This always requires a formal valuation to make sure the price is fair for everyone.

• A Mutual Agreement: You might all decide to rent the property for a while, share the income, and postpone the decision to sell.

• A Partition Action: This is the last resort. If you're truly at a stalemate, a sibling can go to court and apply for an order to force the sale. This legal process is known as a partition action and can be expensive and incredibly stressful on family relationships. It's always better to try mediation first.

The key to avoiding drama is clear communication from the very beginning. Getting independent legal advice early on is also one of the smartest things you can do to navigate these tough conversations and land on a fair outcome.

Have Questions About Your Inheritance? Let's Talk.

Sorting through the details of inheriting property from parents in Australia is a massive task. It’s tough enough dealing with the emotional side of things, let alone trying to get your head around legal duties, probate, and potential Capital Gains Tax.

Getting it wrong can be costly, but you don’t have to figure it all out alone. The team here at Baron Accounting specialises in this area, and we’re here to give you clear, practical advice every step of the way. We’ll make sure your financial interests are protected and you’re fully compliant with ATO rules.

If you’re wondering where to even start with the tax side of things, our article on how to file your taxes correctly is a great resource. We can help you manage your inheritance with confidence.

• Need assistance?

We offer free online consultations:

📱 LINE: barontax

💬 WhatsApp: 0490 925 969

✉️ Email: info@baronaccounting.com

Or use the live chat on our website at www.baronaccounting.com

📌 Curious about your tax refund? Try our free calculator:

👉 www.baronaccounting.com/tax-estimate

For more resources and expert tax insights, visit our homepage:

🌐 www.baronaccounting.com