Estate planning can save your family money, time and stress. But it’s not just about passing things on. It’s also about avoiding tax traps and keeping more wealth in the family.
If you’re already thinking about wills and estate planning, you’re ahead of the curve. These decisions shape how your legacy plays out. A solid plan can cut tax, speed up asset transfer and reduce arguments.
Let’s dig into real, expert-backed tips to help you set things up right.
Start With the End in Mind
When people plan their estate, they often focus only on who gets what. That’s a good start—but if you stop there, you may miss out on real savings that can make a big difference to your family’s future.
Australia doesn’t have a formal inheritance tax like some other countries. But don’t be fooled—your estate might still face significant tax bills. These taxes can reduce what ends up in the hands of your loved ones. The most common tax issues include:
- Capital gains tax (CGT) on assets like investment properties, shares or collectables
- Income tax through trusts, especially if distributions aren’t structured correctly
- Superannuation death benefit taxes when your super is paid to someone who isn’t considered a dependent for tax purposes
Even though there’s no “estate tax” label, these costs are very real. They can easily eat into the value of your estate and catch families by surprise. That’s why proper planning is so important.
To manage this, you need to ask key questions early:
- Should assets be in your name, in joint names or in a trust?
- What happens to your superannuation when you pass away?
- Are your legal documents—your will, trust deed, power of attorney—all working together?
These questions help guide decisions that protect your assets and reduce tax. You don’t need to be wealthy for this to matter. If you own a home, have superannuation, or run a business, your estate is already exposed to these risks.
Working with professionals who understand superannuation and estate planning tax strategies ensures your plan is complete, legal and built to last. When your advisers communicate clearly and your documents align, the estate works like a well-oiled machine—protecting your wishes, supporting your family and keeping more wealth in the right hands.
Use Trusts to Take Control and Reduce Tax
Trusts are one of the best tools in estate planning. They let you control how assets are managed and who benefits. They also help cut tax and protect what you leave behind. For many families, trusts are the difference between a smooth transition and years of stress.
Common trusts include:
- Testamentary trusts that start after death
- Discretionary trusts for flexible income splitting
- Family trusts to manage wealth across generations
Each type serves a purpose and offers different levels of control, flexibility and tax efficiency. Choosing the right trust depends on your goals, the value of your estate and the needs of your beneficiaries.
Here’s how they help:
- Reduce Tax Through Income Splitting
A trust can distribute income to people in lower tax brackets. This spreads the tax burden and lowers the overall amount paid. With a testamentary trust, even young children—who would normally pay penalty tax rates—can access the adult tax-free threshold. This means they can receive up to $18,200 in income each year tax-free, which can save thousands over time. It’s one of the most effective legal ways to reduce tax on inherited income. - Keep Assets Safe
A trust adds protection in case of divorce, lawsuits or debt. If your kids go through a separation or face financial trouble, the assets in a trust are harder for others to claim. This keeps what you’ve built safe for future generations. It also helps prevent misuse or early spending by young or vulnerable beneficiaries. - Build Flexibility
Laws change. A trust gives your executor or trustee options for handling assets when your estate is settled. If tax rates or rules shift, they can respond. This flexibility is crucial when planning for the long term.
We saw a Sydney couple set up a testamentary trust for their kids. Over time, it saved more than $400,000 in tax and protected assets through two divorces and a business collapse. Without that trust, the outcome could’ve been very different.
For families concerned about fairness and stability, it’s important to understand how to prevent family disputes over financial legacies before choosing a trust structure.
Don’t Ignore Superannuation—It’s Taxed After Death
Superannuation isn’t like other assets. It follows different rules after death, and the tax outcome depends on who receives it.
If your spouse gets your super, it’s tax-free. But if it goes to an adult child, tax applies—usually 15% plus Medicare levy. That can cost your family tens of thousands. Many people don’t realise this until it’s too late.
To reduce tax:
- Nominate the right person to receive your super
- Check if they’re considered a tax dependent
- Review the mix of taxable and tax-free components
- Use a binding death benefit nomination if needed
These small steps can make a big difference to how much of your super your family actually gets. Without proper planning, superannuation often becomes one of the most heavily taxed parts of an estate. And because it doesn’t go through your will automatically, it’s easy to overlook.
Super doesn’t pass through your will by default. It’s controlled by the fund and how your nomination is set up. If you haven’t made a valid binding death benefit nomination, the trustee of your fund has the power to decide who receives your super—and in what proportion.
We once saw a case where a man had $700,000 in super but failed to make a binding nomination. The fund’s trustee split it unevenly, and tax took a $65,000 bite—leaving a lot of regret behind. One child received more than expected, the other felt shortchanged, and both paid more tax than they needed to. This avoidable mistake strained family relationships and delayed the process for months.
Linking your super with a well-written will avoids nasty surprises. It ensures that your wishes are clear, your beneficiaries are protected and tax is minimised. To see how each part fits together, take a look at this real scenario showing how a structured will reduced tax and conflict.
Plan for Capital Gains and the Family Home
The family home is usually tax-free, but only under certain conditions.
If your home is sold within two years of your death, and it was your main residence, there’s usually no capital gains tax. But if it’s rented or held longer, the tax exemption may not apply. That means the value of the home could be reduced by tens or even hundreds of thousands if sold outside the two-year window or used as an income-producing asset.
This catches many families off guard. A delay in finalising the estate—maybe due to legal disputes, poor planning or slow administration—can turn a tax-free asset into a taxable one. And that can change the whole value of the estate.
Other assets like investment properties, shares and business interests are all subject to CGT. But timing, ownership and structure can reduce the impact. A little planning now can lead to major savings later.
Smart strategies include:
- Transferring assets to low-income beneficiaries
- Using trusts to manage sale timing
- Applying CGT exemptions where possible
For example, say you leave an investment property to your son. If he sells it outright, the capital gain may be taxed at his marginal rate. That could mean losing 30–45% of the gain to tax. But if that same property goes into a trust, the income and gain can be split across multiple beneficiaries—each using their own tax-free threshold. That reduces the tax and spreads the income evenly.
On the flip side, poorly written wills can force the sale of assets to pay tax or settle disputes. If there’s no liquidity in the estate, executors may have no choice but to sell properties—even the family home. That’s avoidable.
Make sure your plan avoids common traps by reviewing key tax errors caused by poor drafting before locking in your will. Taking time now can save your family from tax stress and legal delays later.
Involve the Right Professionals Early
One of the biggest mistakes in estate planning is trying to do it all yourself—or worse, getting advice from professionals who don’t talk to each other.
A strong estate plan needs a team:
- A lawyer to set up your will, trusts and legal structure
- An accountant to handle tax strategy and asset tracking
- A financial adviser to help with superannuation, insurance and investments
If these people don’t work together, key things get missed. That’s how tax bills rise and family conflict brews.
Let’s look at a real case.
A blended family had three kids—two from the husband’s first marriage and one from the wife’s. The husband left everything to his wife, assuming she’d share it later. She didn’t. She passed all assets to her own child. The husband’s two children received nothing. On top of that, the estate paid over $180,000 in tax due to poor structuring.
That could’ve been avoided if the legal and financial advice had been coordinated upfront.
This kind of misstep isn’t rare. You can see it in this case study showing how bad planning increased tax bills—and it’s a clear reminder that professional advice isn’t just helpful. It’s essential.
Keep Your Estate Plan Updated and Reviewed
Even the best estate plan can fall apart if it’s not kept up to date. Life changes, laws change and families shift over time.
Here’s when to review your plan:
- After a major life event—marriage, divorce, birth or death
- If you buy or sell property or business assets
- When superannuation rules or tax laws change
- Every three to five years as a rule of thumb
We’ve seen cases where an outdated will left assets to an ex-spouse or failed to include younger children. Others had assets left to people who’d already passed away. These errors caused family stress, court battles and big tax bills.
Also, DIY wills or cheap online templates often skip key details that make the plan legally solid. They may seem like a quick fix but usually lead to bigger problems down the road.
Reviewing your estate documents with a lawyer ensures they stay aligned with your goals. It also helps spot any of the key tax errors caused by poor drafting that could put your family at risk.
FAQs: Estate Planning and Tax Minimisation in Australia
1) Do Australians pay inheritance tax?
No, there’s no formal inheritance tax in Australia like you might find in the UK or the US. But that doesn’t mean the taxman stays out of it. When someone dies, their estate might still owe tax through other means. The most common are capital gains tax (CGT) and superannuation death benefit taxes.
CGT kicks in when assets like property, shares or businesses are sold after death. The gain is based on the difference between what the asset was worth when first bought and what it sells for. If a beneficiary inherits an asset and later sells it, they might end up with a big tax bill.
Superannuation also causes problems. If your super goes to someone who’s not a dependent (like an adult child), the taxable portion of your super can be taxed at up to 17%. That’s a big chunk of money gone.
That’s why estate planning is about more than just writing a will. It’s about structuring things right to legally minimise tax. Use trusts, assign the right beneficiaries, and get advice that fits your situation. With smart planning, you can keep more money in the family—and less with the ATO.
2) Can a trust help reduce tax for my children?
Yes, a trust—especially a testamentary trust—can be one of the most effective ways to reduce tax for your children or other beneficiaries. When assets go into a testamentary trust, income from those assets can be split between family members. This spreads the income across people with different tax rates, so less overall tax is paid.
One key benefit is how it helps kids under 18. Normally, they pay high tax on passive income from an inheritance. But if they receive that income through a testamentary trust, they get the same tax-free threshold as an adult. This can result in thousands in savings each year, especially if the estate is large.
Trusts also protect the assets themselves. If your child later goes through a divorce, bankruptcy or lawsuit, the assets inside the trust are harder to touch. That protection can be just as valuable as the tax savings.
But it’s important that the trust is set up properly in your will. If the language is unclear or the structure is wrong, it could fall apart. That’s why it’s critical to have your estate documents reviewed by a lawyer who knows how trusts work and how to draft them for maximum benefit.
3) How is superannuation taxed after death?
Superannuation often catches people off guard when it comes to estate planning. Many assume it passes tax-free to loved ones—but that’s not always true. Whether your super is taxed after death depends on who receives it and how it’s set up.
If your spouse or a financial dependent (like a child under 18 or someone financially reliant on you) receives your super, there’s no tax on it. But if it goes to someone who isn’t a dependent—like an adult child or a sibling—it can attract up to 17% tax on the taxable component.
That might not sound like much, but if your super balance is large, that tax adds up fast. A $600,000 balance could cost the family over $100,000 in unnecessary tax if left to non-dependents without a plan.
There are ways to reduce this. Some people choose to withdraw the taxable portion of their super while alive—especially if they’re retired and over 60. Others make sure their death benefit nominations are binding, up to date and consistent with their will.
Remember, your super doesn’t automatically follow your will. It’s managed by the fund’s trustee. So it’s crucial to review how your super fits into your estate plan and who it goes to.
4) What assets attract capital gains tax when passed on?
Capital gains tax (CGT) is one of the most common taxes that affects estates in Australia. When someone dies, CGT doesn’t usually apply immediately. But once assets are sold—either by the estate or by the person who inherits them—CGT can hit hard.
Assets that may attract CGT include:
- Investment properties
- Shares and managed funds
- Business interests
- Collectables like art, wine or antiques
The family home is usually exempt from CGT, but only if it was your main residence and is sold within two years of death. If it’s rented out or held for too long, tax may apply. That’s why timing matters.
Other assets carry their original cost base into the estate. So if your daughter inherits shares and later sells them, she may pay CGT based on the original purchase price—not what they were worth when you passed.
To manage CGT, it helps to plan who gets what. Low-income earners pay less tax on gains. Trusts can also help control when assets are sold and how gains are split. Structuring your estate the right way allows your family to avoid tax shocks and protect wealth across generations.
5) What happens if I don’t update my estate plan?
If your estate plan is out of date, it may not reflect your real wishes—and that can cause big problems. Life changes fast. You might marry, divorce, have more kids or gain new assets. If your will doesn’t keep up, your estate could go to the wrong people, or miss people you care about.
We’ve seen wills that left everything to an ex-spouse because no one updated the documents after a divorce. We’ve seen kids accidentally left out because they were born after the will was made. These mistakes often end up in court, where the process drags out and the estate shrinks fast due to legal fees and tax.
Tax laws change too. Superannuation, trusts and capital gains rules all shift from time to time. What worked five years ago may not work today. If your documents don’t keep up, your family could face higher tax than needed.
That’s why estate plans should be reviewed every few years or after a big life event. An up-to-date plan ensures your wishes are clear, your assets go where they should and your loved ones aren’t left to clean up a legal mess. It’s one of the simplest ways to protect your legacy.
Future-Proof Your Legacy—Get It Right From the Start
Estate planning isn’t about ticking boxes or waiting until you’re older. It’s about taking control now—before it’s too late.
A strong plan does more than say who gets what. It:
- Cuts tax so more goes to your family
- Protects assets from legal risk
- Avoids confusion and conflict after you’re gone
It’s not just for the wealthy. If you own property, have super or care about your family’s future, estate planning matters to you.
The key is to get it done right. That means expert legal drafting, smart tax strategy and clear communication with your family.
For help building a legally sound, tax-efficient plan that suits your life, reach out to the team at Ignify Legal. We specialise in estate law and know how to make your plan strong, simple and safe.
Please call us today at (02) 9413 4708 or submit an online enquiry.
