Inheritance Tax for UK Expats in Australia (2026)

Australia does not levy an inheritance tax or an estate duty. Those charges were abolished across the states and at federal level by the early 1980s, so a beneficiary in Australia does not pay tax simply for receiving money or assets from a deceased person. That headline can be misleading for UK expats, because two other systems still bite. Australia applies capital gains tax (CGT) to certain inherited assets when they are later sold, and the UK can still charge inheritance tax (IHT) on UK assets and on the worldwide estate of someone treated as a UK long-term resident.

This guide sets out how the Australian CGT rules treat inherited assets in 2026, and where UK IHT exposure continues for people who have moved to Australia. The interaction between the two regimes is what matters for an expat estate.

• Australia has no inheritance tax or estate duty; beneficiaries are not taxed on receipt.
• Australia applies CGT when an inherited asset is later sold, using inherited cost-base rules.
• A main residence inherited from the deceased can be exempt if sold within two years of death.
• UK IHT still applies to UK-situated assets regardless of where the owner lives.
• From 6 April 2025 UK IHT is based on residence; a long-term resident is taxed on worldwide assets.
• From 6 April 2027 most unused UK pension funds are due to fall within the estate for IHT.

No inheritance tax, but CGT can follow

Australia abolished death duties by 1979 at federal level, with the states following so that no estate or inheritance tax remained by the mid-1980s. A beneficiary receiving cash, shares or property from an estate has nothing to declare on receipt. The tax point is deferred rather than removed. When the beneficiary later sells an inherited asset, CGT may apply to the gain, and the gain is measured using a cost base that is inherited from the deceased rather than reset to the date of death in every case.

Income produced by inherited assets, such as rent or dividends, is also taxable in the normal way once the asset is in the beneficiary's hands. The point to hold on to is that the absence of an inheritance tax does not mean the assets are tax-free forever.

Cost base of inherited assets

The Australian Taxation Office sets the cost base of an inherited asset by reference to when the deceased acquired it. The cut-off date is 20 September 1985, when CGT began. The table summarises the general position for the first element of the cost base.

The practical effect is that a beneficiary can inherit unrealised gains built up during the deceased's ownership and pay CGT on them at sale. Records of the deceased's original purchase price and dates therefore matter, because they determine the gain on a later disposal.

The main residence exemption

A dwelling that was the deceased's main residence can pass to a beneficiary free of CGT if it is sold within two years of the date of death and was not being used to produce income just before death. The ATO can extend the two-year window in limited circumstances, such as a contested will or a delay outside the beneficiary's control. If the property is kept beyond that period and later sold, a partial or full CGT charge can arise depending on how the home is used in the meantime. The exemption is generous but time-limited, and the clock starts at death.

Where UK inheritance tax still applies

Moving to Australia does not switch off UK IHT. Two routes to a UK charge remain. First, UK-situated assets, such as UK real estate, are within the scope of UK IHT whoever owns them and wherever the owner lives. Second, from 6 April 2025 the UK moved from a domicile-based system to a residence-based one. A person who has been UK tax resident for at least 10 of the previous 20 tax years is a long-term resident and is exposed to UK IHT on their worldwide estate. Someone who is not a long-term resident is exposed only on UK-situated assets.

For an expat who has left the UK, worldwide exposure does not end immediately. A long-term resident who leaves keeps a worldwide IHT tail, ranging from three years for shorter periods of residence up to a maximum of ten years for longer stays. The standard UK nil-rate band is £325,000 and the residence nil-rate band is up to £175,000, both frozen until April 2031, with the rate above the threshold at 40 per cent. Separately, from 6 April 2027 most unused UK pension funds are due to be brought within the estate for IHT, which is relevant for anyone who has left a UK pension behind.

Because Australia has no inheritance tax, there is no Australian death charge to credit against a UK IHT bill, so UK exposure is not reduced by an offsetting Australian liability. The UK-Australia position turns on the situs of assets and on UK long-term residence status.

This article is for general information only and does not constitute financial, tax or regulatory advice. Kaeltripton.com is not authorised or regulated by the FCA. Pension and tax rules differ by country of residence and change over time. Verify any figure with official sources such as GOV.UK, HMRC or the FCA, and take advice from a suitably authorised adviser in your country of residence before acting.

FAQ

Does Australia charge inheritance tax in 2026?

No. Australia abolished inheritance tax and estate duty by the early 1980s. A beneficiary is not taxed on receiving assets from an estate, though capital gains tax can apply when an inherited asset is later sold.

Will I pay capital gains tax on an inherited property in Australia?

Possibly. A main residence inherited from the deceased can be exempt from CGT if it is sold within two years of death and was not producing income. Kept longer or used to produce income, a CGT charge can arise on a later sale.

How is the cost base of an inherited asset worked out?

For assets the deceased acquired on or after 20 September 1985, the cost base is generally the deceased's own cost base. For a qualifying main residence passing after 20 August 1996, and for pre-1985 assets, it is the market value at the date of death.

Can the UK still tax my estate after I move to Australia?

Yes. UK-situated assets remain within UK IHT wherever you live. If you have been UK tax resident for at least 10 of the previous 20 tax years you are a long-term resident and exposed to UK IHT on worldwide assets, with a tail of three to ten years after leaving.

Are my UK pensions affected by UK inheritance tax?

From 6 April 2027 most unused UK pension funds are due to be included in the estate for IHT. The standard nil-rate band is £325,000 with a residence nil-rate band of up to £175,000, both frozen until April 2031.