Estate Planning and Property: Passing Real Estate to Your Children in Australia 2026

Effective estate planning property strategies protect your family’s wealth and prevent costly disputes. Property is the largest asset most Australians own, and without proper planning, passing it to your children can trigger unnecessary taxes, family conflict, and unintended outcomes. Whether you own a family home, investment properties, or both, understanding how to structure your estate planning property decisions now will save your heirs thousands in taxes and legal fees later.

Understanding CGT on Inherited Property in Australia

One of the most misunderstood aspects of estate planning property transfers is capital gains tax (CGT). When you inherit property in Australia, you generally do not pay CGT at the time of inheritance. However, CGT becomes payable when you eventually sell the inherited property. The tax calculation depends critically on when the deceased originally purchased the property.

Pre-CGT Properties (Acquired Before 20 September 1985)

For properties acquired before 20 September 1985, the cost base resets to the market value at the date of death. This means beneficiaries pay no tax on any growth that occurred during the deceased’s ownership, a significant estate planning property advantage for older assets.

Post-CGT Main Residences

If the deceased owned the property after 20 September 1985 and it was their main residence, special rules apply. If the beneficiary sells within two years of the death, the property generally remains CGT-exempt. However, if sold after two years, CGT applies on growth since the original purchase date. This two-year window is a critical estate planning property consideration for families deciding whether to sell or hold inherited homes.

Investment Properties

For investment properties, beneficiaries inherit the deceased’s original cost base. This means CGT applies on all capital growth since the deceased first purchased the property, not just growth after inheritance. Proper estate planning property documentation is essential to track original purchase prices and improvement costs.

The Will: Your Estate Planning Property Foundation

Dying without a valid will (intestate) means your estate is distributed according to the Succession Act in your state, which may not reflect your wishes and will definitely take longer and cost more. For property owners, a valid will specifying who inherits specific properties is non-negotiable. Your will should clearly identify each property by address and legal description, name specific beneficiaries, and appoint an executor capable of managing property settlements.

Update your will whenever you acquire or sell property, experience family changes (marriage, divorce, birth of children), or when property values change significantly. Outdated wills are a leading cause of estate planning property disputes.

Joint Ownership Options for Estate Planning Property

How you structure property ownership today determines how it passes to the next generation. Two primary ownership structures exist in Australia, each with distinct estate planning property implications.

Joint Tenants

Under joint tenancy, both owners own the whole property equally. On death, the surviving owner automatically inherits the deceased’s share through the right of survivorship. Critically, the property does not pass through the will, it transfers automatically. This structure is most appropriate for married couples or de facto partners who want simple, automatic transfer. However, it offers no flexibility for leaving property to children while your spouse is alive.

Tenants in Common

Each owner holds a defined share (such as 50/50, 70/30, or any other split). On death, each owner’s share passes according to their will, not automatically to the co-owner. This structure provides far more estate planning property flexibility for blended families, business partners, or situations where you want to leave your share to children while allowing a spouse to continue living in the property through a life interest.

Family Trusts in Estate Planning Property Strategies

A discretionary family trust can hold investment properties, with income and capital distributed to beneficiaries at the trustee’s discretion. This structure offers powerful estate planning property benefits, including income splitting across lower-taxed family members, asset protection from personal creditors and lawsuits, and estate planning flexibility across generations.

However, trusts involve significant costs: setup fees range from $2,000 to $5,000, annual accounting costs run $2,000 to $5,000, and some states impose land tax disadvantages (Victorian trusts lose the land tax-free threshold). Additionally, positively or negatively geared property held in trusts requires careful tax planning to maximise benefits.

Transferring Property to Children During Your Lifetime

Some parents consider gifting or transferring their home to children while still alive. This triggers immediate stamp duty (calculated on full market value in most states) and potential CGT on investment properties. For main residences, the main residence CGT exemption may apply, but you lose this exemption permanently once you no longer own the property.

Additionally, transferring property early can affect Age Pension eligibility, expose the property to your children’s creditors or divorce settlements, and create complications if you need to access equity later. Before making early estate planning property transfers, consult an estate planning solicitor and financial advisor. If you’re considering major financial changes, also review whether you should refinance your mortgage as part of a broader estate strategy.

Avoiding Family Disputes Through Clear Estate Planning Property Documentation

Property inheritance disputes destroy families. Clear documentation prevents most conflicts. Your estate planning property documentation should include a current, professionally drafted will reviewed by a solicitor experienced in property law, written explanations of your decisions (such as why one child receives the family home while another receives investments), and up-to-date property valuations to ensure equitable distribution.

Consider family meetings to discuss your estate planning property intentions before your death. While uncomfortable, these conversations prevent surprises and allow you to explain your reasoning. Transparency dramatically reduces the likelihood of will contests.

Working with Estate Planning Property Professionals

Effective estate planning property strategies require coordinated advice from multiple professionals. An estate planning solicitor drafts your will, advises on ownership structures, and ensures legal compliance. Your accountant provides CGT and income tax advice, particularly for investment properties and trusts. A financial advisor integrates estate planning property decisions with your broader wealth strategy and retirement planning.

According to Australian Taxation Office guidance on inherited property, proper professional advice can save families tens of thousands in unnecessary taxes. The cost of professional estate planning property advice (typically $2,000 to $5,000 for comprehensive planning) is insignificant compared to the potential tax savings and dispute resolution costs.

Review Your Estate Planning Property Strategy Regularly

Estate planning property strategies are not set-and-forget. Review your plan every three to five years, or immediately after major life events (marriage, divorce, birth of grandchildren), significant property acquisitions or sales, or changes in tax law or family circumstances. Regular reviews ensure your estate planning strategies remain aligned with your goals and current law.

Frequently Asked Questions