Australia abolished inheritance tax in 1979. There is no estate duty, no death duty, no succession tax of any kind. For British expats who have spent years navigating HMRC’s 40% charge, this is one of the genuinely attractive features of Australian life – and unlike some countries in this series, it applies cleanly: no regional variation, no stamp duty on inherited assets, no French-style 60% rate for non-family beneficiaries. An estate passing to adult children in Australia faces no Australian inheritance tax at all.
That is only part of the picture. Australia’s tax system replaces the one-off death charge with a deemed disposal mechanism for capital gains tax, superannuation death benefits carry their own tax treatment, and – most importantly for British nationals – the UK’s 40% inheritance tax on worldwide assets continues to apply to those who remain UK-domiciled regardless of how long they have lived in Sydney or Melbourne. Two of those three issues are manageable with good planning. The UK IHT tail requires specific structural action.
Australia’s Succession Framework – What There Is
With no inheritance or estate tax, the succession costs in Australia are limited to the process of estate administration rather than any tax on the transfer itself. Australian estates pass through probate – a court-supervised process requiring a grant of probate or letters of administration before assets can be distributed. The process is handled at state level and, for an uncomplicated estate with a valid will, typically takes several months. During that period, Australian-held assets are frozen and beneficiaries must wait. A British expat who dies holding Australian bank accounts, Australian shares, and property in Queensland faces a probate process in Queensland before anything moves.
The CGT deemed disposal point is worth understanding clearly. When a person dies in Australia, their assets are not subject to inheritance tax – but they are subject to CGT rules on transfer to beneficiaries. Assets passing to an Australian tax resident beneficiary generally carry over at the deceased’s cost base, with the CGT event deferred to when the beneficiary eventually sells. This is not a tax at death itself but a potential future liability that the beneficiary inherits alongside the asset. For British expats whose Australian-held investments carry significant unrealised gains, this is a planning consideration for the next generation rather than an immediate charge.
Superannuation death benefits have their own specific tax treatment and do not follow the standard succession rules. Superannuation paid on death to a dependant – a spouse or minor child – is generally tax-free. Paid to an adult non-dependant child (the most common situation for British expats in Australia whose adult children are not financially dependent), the taxable component of the superannuation benefit is subject to tax at 17% (15% plus the Medicare levy). For large superannuation balances, this creates a tax cost that is distinct from, and unrelated to, the CGT position on other estate assets.
UK Inheritance Tax Does Not Stop at the Tasman Sea
For UK-domiciled British nationals, HMRC charges inheritance tax at 40% on the worldwide estate above the nil-rate band of ВЈ325,000. Domicile is not determined by where you live – most British nationals in Australia retain their UK domicile of origin unless they have formed a genuine and settled intention to remain in Australia permanently and can demonstrate it clearly. British professionals on temporary visas have not, by definition, formed a permanent intention to remain – their visa status precludes it. Even those who obtain permanent residency often retain UK family connections, UK property, UK pension entitlements, or simply the realistic possibility of returning. HMRC’s domicile assessment is conservative and the burden of proof rests with the individual.
The consequence is that a British professional in Perth whose worldwide estate comprises a UK property, a UK investment portfolio, an Australian superannuation fund, and an offshore portfolio bond faces UK IHT at 40% on the combined value above ВЈ325,000 – regardless of Australia having no inheritance tax of its own. The two systems do not interact: Australia imposes no charge, but HMRC imposes its full charge on the same worldwide assets.
From April 2025, the UK introduced a residency-based reform to IHT: once you have been non-UK resident for ten consecutive tax years, your non-UK assets begin to phase out of UK IHT. For British expats who have been in Australia long enough and consistently pass the HMRC Statutory Residence Test as non-UK resident, this creates a genuine planning horizon. But for those in the first decade of Australian residency – and particularly those on temporary visas who frequently visit the UK and must manage their SRT position carefully – UK IHT on worldwide assets remains fully in scope.
The contrast with destinations like France is instructive. In France, British expats face both French succession tax (up to 60% for non-family beneficiaries) and UK IHT simultaneously – a double exposure that requires careful structuring to address. In Australia, the local succession environment is benign: no charge, clean probate process, well-established common law framework. The only substantial succession problem for most British expats in Australia is the UK IHT tail, which makes the planning task more focused than in France but no less important for those with estates above the nil-rate band.
The Named Beneficiary Mechanism
A portfolio bond – an international investment-linked insurance policy written out of a jurisdiction such as the Isle of Man or Guernsey – addresses both the Australian probate process for the policy value and the UK IHT exposure, through the same structural mechanism.
A portfolio bond is a life assurance contract. On death, the insurer pays the policy proceeds directly to the named beneficiaries without the funds passing through the estate. In Australia, this means the policy value bypasses the probate process entirely – beneficiaries receive the proceeds directly and promptly, without waiting for a state court grant. For a British professional in Australia whose estate includes a portfolio bond alongside Australian property and superannuation, the investment portfolio reaches beneficiaries while the other assets follow the standard administration process. The liquidity available to beneficiaries before probate completes can be practically important – particularly for beneficiaries who are UK-resident and not embedded in the Australian legal system.
For the UK IHT dimension, appropriate trust structuring around the policy can in many circumstances remove the policy value from the UK taxable estate. A portfolio bond held directly by a UK-domiciled policyholder remains within their UK estate for HMRC’s assessment. Where the policy is written in trust – an offshore trust arrangement established outside the policyholder’s estate – the death benefit can fall outside the 40% UK IHT charge. This requires correct structuring from the outset: the trust instrument, the reservation of benefit provisions, and the ongoing relationship between the policyholder, the trust, and the policy all need specialist legal attention. Retrospective restructuring after a diagnosis is rarely effective.
Portability – Particularly Relevant in Australia
Australia is, for many British nationals, a long posting rather than a permanent destination. The pattern of British professionals spending a career phase in Australia before returning to the UK, moving to Singapore, or relocating elsewhere is common – particularly in finance, law, medicine, and engineering. A portfolio bond written from the Isle of Man or Guernsey travels with the policyholder through all of those moves. The named beneficiary designation and trust arrangement remain in force whether the policyholder is subsequently in the UK, Singapore, or anywhere else. The section 26AH ten-year clock that began in Australia continues to run regardless of where the policyholder is tax resident when the policy eventually matures – provided the policy terms and structure remain qualifying throughout.
For British professionals in Australia who have not yet reviewed their UK IHT position – particularly those whose total worldwide estate including UK assets exceeds the nil-rate band – a portfolio bond in trust for the investment portfolio, alongside a valid Australian will covering local assets and a UK will covering UK assets, provides a practical and portable framework. Providers such as RL360, Hansard, Friends Provident International (FPI), and Utmost International all write Isle of Man or Guernsey-based structures suitable for this purpose. Request a free consultation here