What Happens When You Inherit A House From Your Parents?

Around 60% of Australians can expect to receive an inheritance at some point in their lives. That might be an old family watch, a savings account, or—as is often the case—the family home. 

Here’s a more surprising side to the statistics: If you’re like most people, you won’t receive any substantial inheritance until you’re in the 55-59 age bracket. According to The Conversation, more than 80% of inheritances in Australia are passed down to people who are already middle-aged or older. By then, your own kids might be thinking about their first home deposit, and you’ll probably have different financial priorities than you did at 30.

If you do share the experience of the average Aussie, you’ll get more time to spend with the oldies. You’ll also have more time to prepare for what happens when you inherit a house from your parents. 

It’s the kind of inheritance that can change your life in ways both big and small. There’s the obvious benefit to your financial future—but that benefit arrives right when you’re trying to process one of life’s deepest losses. 

Most of us aren’t ready for the flood of paperwork and decisions that come with property inheritance. It is, after all, pretty hard to think clearly about tax forms and legal documents when you’re going through old photos, sorting decades of stored belongings, and wracking yourself with guilt over silly arguments.

The Personal Side of Property Inheritance

The loss of a parent brings up a flood of emotions and memories, many of which are tied to the family home—the kitchen where Sunday dinners were shared, the backyard where childhood games were played, the living room where family traditions took root. 

With all this swirling through your mind, you’re somehow expected to methodically work through what happens when you inherit a house from your parents—the mountain of paperwork, legal documents, and decisions about property that feel impossible to resolve. There are tax implications to understand, legal processes to follow, and sometimes complicated family dynamics to manage, all while processing your loss.

We understand how intense this experience can be, so we’ve created this guide to help. In it, you’ll find an easy-to-follow breakdown of the essential details you need to know about inheriting property in Australia. We walk you through the immediate considerations (like transfer procedures and tax obligations) and longer-term decisions about whether to keep, sell, or rent the property. You’ll learn about capital gains tax implications, your rights as a beneficiary, and how to protect your inheritance. Most importantly, we’ll translate complex legal and tax terminology into straightforward explanations, helping you make informed decisions at your own pace.

Let’s start with the simple questions and work our way up to the trickier topics. 

Do You Pay Tax On An Inherited House?

Australia doesn’t have inheritance tax, so receiving the property itself doesn’t trigger any immediate tax obligations. It’s what you do with the property afterwards that might affect your tax situation.

Do You Pay Capital Gains Tax On Inherited Property?

The simple answer to this question is no. At the time you inherit the property, you won’t have to pay any capital gains tax (CGT). 

CGT only becomes relevant when you sell the inherited property. 

The tax would then technically apply to any increase in the property’s value from the time your parents acquired it until you sell it. However, there are several important exemptions and considerations:

  • The property’s cost base (the amount used to calculate capital gains) is generally the market value at the date of death, not the original purchase price
  • If the deceased person used the property as their main residence, and you sell it within two years of their death, you may be exempt from CGT
  • If you move into the inherited property as your main residence, you may qualify for a CGT exemption when you eventually decide to sell

Pro tax tip: The two-year main residence CGT exemption period can be extended in some cases—talk to your accountant to learn more.

Do You Pay Stamp Duty On Inherited Property?

No, you do not have to pay stamp duty when inheriting property in Australia. Stamp duty (also known as transfer duty) only applies to property purchases and transfers that involve monetary value, not to inheritances through a deceased estate. 

No stamp duty is payable even if multiple beneficiaries inherit the property together. The only time stamp duty would come into the equation is if: 

  1. You buy out other beneficiaries’ shares of the inherited property
  2. You transfer the inherited property to another person after receiving it (e.g. You inherit your parents’ property and then transfer ownership to your child)

Can Siblings Force The Sale Of Inherited Property?

No single beneficiary can force others to sell their share of the property. However, any co-owner can apply to the Supreme Court for a partition or sale order. The court generally favours allowing co-owners to exit their investment if they wish, and mediation is usually required before the court will intervene. 

The costs of court proceedings can get pretty eye-watering, so settling things between yourselves is usually the most cost-effective option. Of course, coming to an agreement that makes everyone satisfied can be easier said than done. Many people find it helpful to explore creative solutions as they try to find a resolution that works for everyone. 

For example, one sibling might buy out the others’ shares, perhaps with an extended payment plan. Or you might agree to rent out the property and share the income while postponing the final decision. 

If you’re struggling, research your options. For example, you might be able to find a good family mediator who specialises in estate matters—their job is to help siblings find middle ground while preserving relationships. 

When Does Inherited Property Become Marital Property?

Perhaps you inherited a house years ago, and you’re wondering whether it could get tied up in divorce proceedings. Or maybe you’re engaged (if so, congrats) and have just inherited property from your parents. You might even be thinking ahead, wondering how to protect a future inheritance from a spouse you haven’t met yet! 

Whichever camp you’re in, this is a smart question to be asking. Yes, it is a bit weird to think about protecting your inheritance from a divorce you hope to never have. But it’s also a practical consideration that’s worth understanding.

This is a highly technical area where estate law meets family law and somehow manages to get more complicated. However, here are a few general facts to keep in mind:

  • Inherited property remains separate from marital assets if you keep it completely separate from family finances
  • Once you mix inherited property with marital assets (like using it as a family home or rental property where income goes into a joint account), it may be considered part of the marital pool
  • A binding financial agreement (prenup) can help you protect your inherited assets in case of divorce
  • The timing of the inheritance and length of the marriage might affect how courts treat the property in a divorce 
  • De facto relationships of two years or more can have similar property rights to marriages under Australian law, so these considerations can apply equally to de facto couples

Though these points can guide you somewhat, every relationship breakdown is going to be unique. Courts consider multiple factors when dividing assets, making it impossible to predict exactly how inherited property will be treated in your specific case. 

This is why lawyers recommend we have these conversations while we’re still happy and very much in love. 

What Can You Do With an Inherited House?

From a tax and financial planning perspective, what happens when you inherit a house from your parents needs careful consideration. Each option—moving in, selling, or renting—comes with its own tax implications and financial outcomes that could significantly impact your long-term wealth-building goals. 

Again, there is no one perfect choice—only the right choice for you. You’ll hit this ideal decision by considering your current financial context, your tax situation, and the long-term goals you’re aiming to achieve.

ITP’s tax accountants can help you model different scenarios, factoring in your current income, your tax bracket, the capital gains implications, and potential rental returns. We can also advise on the optimal timing of your decision, particularly regarding the two-year CGT exemption period, which could save you thousands in tax.

For now, though, here are the main options:

Move In

If you plan to live in the house:

  • Consider any necessary renovations or updates (some may be tax-deductible if you later rent the property)
  • Review insurance coverage and ensure proper asset protection
  • Update utility accounts and transfer council rates
  • Redirect mail and update the address with relevant authorities
  • Consider how living there affects your existing property arrangements (e.g., CGT implications if you own another property)

Sell It

Selling an inherited property requires:

  • Getting professional valuations to establish market value at the date of inheritance (crucial for CGT calculations)
  • Understanding CGT implications and timing the sale strategically (visit our guide to avoiding CGT when selling a property to learn more)
  • Deciding whether to sell as-is or renovate first (calculate potential ROI)
  • Considering the timing of the sale (market conditions, two-year CGT exemption period)
  • Factoring in selling costs when calculating potential net proceeds
  • Planning for the tax impact of a large capital gain in one financial year

Rent It Out

If you decide to become a landlord:

  • Understand your obligations under tenancy laws
  • Consider using a property manager (their fees are tax-deductible)
  • Set up appropriate landlord insurance
  • Keep meticulous records for tax purposes—a good accounting system is essential
  • Be prepared for ongoing maintenance costs
  • Plan for tax-deductible expenses like repairs, council rates, and insurance
  • Consider depreciation schedules for tax benefits
  • Set up separate bank accounts for rental income and expenses
  • Remember rental income affects your taxable income and potentially government benefits

Though you really do only have three main options to choose from, that doesn’t make this a simple decision. The financial implications of each option can be significant. For instance, renting the property might push you into a higher tax bracket, while selling might trigger a large CGT event. 

A qualified tax accountant can help you understand these implications and structure your decision in the most tax-effective way.

Common Dramas to Avoid When You Inherit Property

As tax accountants, we often see clients who feel pressured to make quick decisions about inherited property. The most successful outcomes typically come from people who give themselves permission to pause and process. 

There’s rarely any need to rush—most decisions about inherited property can wait a few weeks or even months while you gather information and get proper advice.

Here are the main things to be careful of during this difficult time:

Rushing Decisions

Instead, give yourself time to:

  • Understand all your options
  • Get professional advice
  • Consider long-term implications
  • Process your emotions before making major decisions

Poor Record Keeping

Maintain records of:

  • The property’s value at the date of inheritance
  • Any improvements or repairs you make
  • Rental income and expenses if you lease it
  • Documents related to the deceased’s ownership

Neglecting Professional Advice

Consider consulting:

  • A tax accountant for CGT advice
  • A lawyer for property transfer and estate matters
  • A financial advisor for investment decisions
  • A property manager if you plan to rent

Misunderstanding Joint Ownership

If you inherit a share of a property:

  • Understand your rights and obligations as a co-owner
  • Get agreement on property management decisions
  • Keep clear records of any shared expenses
  • Have a written agreement about usage or rental income

Taking your time and seeking proper guidance early can prevent costly mistakes and family tensions down the track. Small steps now—like keeping good records and getting clear agreements in writing—can save significant stress later.

Making the Most of Your Inheritance

Inheriting property can be a messy milestone that creates opportunities and challenges in equal measure. While we’ve been able to tick off a lot of the technical aspects of property inheritance in this guide, there’s no one-size-fits all answer to how property inheritance works. 

Your inherited property might be brimming with decades of happy memories and evidence of your parents’ hard work. It might represent the chance for you to build long-term wealth or perhaps even retire early. Or it might be a chaotic mix of traumatic memories, physical clutter, and other emotionally heavy challenges. Every situation is unique. 

One thing that remains true is that, when you’re ready to make decisions about your inherited property, it helps to have experienced advisors in your corner. Whether you’re thinking of keeping it in the family, turning it into an investment, or selling it in pursuit of other goals, ITP’s tax accountants can help you understand and plan for tax implications. So, if you have questions about CGT implications, investment strategies, or any other aspect of managing inherited property, feel free to give us a call or book a consultation at your local ITP office. Our team is always here to help.