The big wealth transfer

Are you ready?

In what has been described as the largest intergenerational transfer of wealth in history, an estimated $3.5 to $5.4 trillion (yes, trillion with a T) is expected to pass from Australian baby boomers to younger generations over the next two to three decades.

According to a Productivity Commission report into wealth transfers and their economic effects, $1.5 trillion in wealth was already transferred between 2002 and 2018: $1.3 trillion in inheritances and $155 billion in gifts. Inheritance recipients were typically just over 50 years old, while gift recipients were much younger (commonly in their early 20s). Non-financial assets were found to make up around 60% of household wealth, with real estate being the largest asset holding for most. Financial assets make up the remaining 40%, including superannuation and other currency and deposits.  

As older baby boomers reach their 80s, this wealth transfer is only going to accelerate – and with all this wealth changing hands, the question they and inheriting generations need to ask is:

What do we do with all this money?

Understanding inheritance and wealth transfer 

Unlike Japan, the UK and the US, Australia does not currently have an inheritance tax. It was abolished in 1979 by the Fraser Government.  

However, there are important financial considerations for benefactors and beneficiaries when it comes to transferring wealth, both before and after death. According to the Australian Bureau of Statistics, the average net worth of an Australian household rose from $530,000 in 2004 to $1,584,000 in 2024. This tripling of wealth shows it’s not small change we’re talking about, but substantial sums of money. 

Gifting and capital gains tax 

Australia does not currently have a gift tax, and there is no dollar limit on how much cash you can gift for tax purposes.  

However, capital gains tax (CGT) can apply to some asset transfers such as investment property, shares, and cryptocurrency. In these cases, the transfer is considered a disposal, and the giver may be liable for CGT on any increase in value since they bought it. Sometimes, investment properties can also attract stamp duty payable by the recipient. Different rules apply if the assets are passed to a beneficiary as an inheritance after death, rather than being gifted while the benefactor is alive.  

There is usually no CGT or stamp duty payable on the family home, unless the beneficiary keeps it for more than two years following the benefactor’s death. This applies regardless of whether the beneficiary lives in the home or rents it out within the two year period. After two years, the property is treated as an investment if it is not lived in, and CGT applies to any increase in value from the date of death.  

For pensioners wanting to gift money to recipients before death (for example – to keep their pension after selling the family home), it’s important to be aware of Centrelink’s 10/30 rule. This states that you can gift up to $10,000 per financial year, regardless of how many people receive the gifts, provided the total gifted does not exceed $30,000 over a rolling five-year period. Any amount gifted over these limits is considered a deprived asset and will still count for a period of five years which can affect your pension.

Death benefits tax on superannuation 

While not an inheritance tax, wealth transferred from a superannuation fund to a recipient is liable for death benefits tax unless the recipient is a tax dependent (such as a spouse, child under 18, or other financial dependent).  

If an adult child receives the superannuation as part of an inheritance, these rules typically apply:

• No tax on after-tax (non-concessional) contributions.
• A maximum of 15% tax on contributions and earnings where 15% tax has already been applied.
• A maximum 30% tax on untaxed contributions and earnings. 

A 2% Medicare levy is also payable in some circumstances.  

One strategy commonly used by retirees to avoid this is superannuation recontribution. This involves withdrawing a tax-free lump sum from their super and immediately putting it back as a non-concessional contribution. This converts the money from a taxable component to a tax-free component and ensures that when the balance is eventually inherited by adult children, they won't lose 15% plus the 2% Medicare levy of that amount to the tax office.  

Trusts and high net wealth families 

For high net wealth families, trusts and other tax structures play a key role in protecting assets and preserving intergenerational wealth. Large inheritances often come from family-held assets, and without careful planning these can be diluted over time or affected by life events such as separations, legal claims, or changes in ownership.

Structures like trusts allow assets (property, land, business holdings, and so on) to remain in the trust without being directly transferred. Properly managed, the trustee can distribute benefits to remaining family members according to the trust’s terms, while maintaining control over timing, vesting, and ongoing management. Testamentary trusts, for example, can divide an inheritance among multiple beneficiaries, provide a protective layer around large sums, and even allow assets to pass through multiple generations without dilution. For instance, a $10 million estate for four children could be split into four testamentary trusts, with each child receiving their portion and the potential for these assets to continue down the line to grandchildren.

High net wealth families also need to consider new tax implications, such as the Division 296 tax, which applies an additional 15% tax on earnings for superannuation balances exceeding $3 million. For balances over $10 million, this additional tax increases to 25%, bringing the total effective tax rate on those earnings to 40%. Early or structured gifting, including partial withdrawals from super, can reduce tax exposure and place beneficiaries in a stronger financial position. For example, by helping pay off mortgages or providing capital to invest in the baby boomer’s own wealth accumulation.

Planning for fair distribution 

Another important consideration is how the estate will be balanced among beneficiaries before the benefactor(s) pass away.

Where gifts are provided to some children but not others, it can create unintended imbalances within the estate. Without clear planning, this may lead to disputes or feelings of unfairness among beneficiaries.

Addressing this early allows families to record gifts, clarify intentions, and structure the estate in a way that reflects the benefactor’s wishes. It can also help reduce the risk of disputes or challenges under family provision laws, which allow certain beneficiaries to contest an estate if they believe adequate provision has not been made for them.

Wondering where to start? Do as the wealthy do 

Our financial services team regularly works with clients at every stage of wealth transfer, including:

• Retirees looking to maximise their savings.
• Parents looking to support their children during their lifetime.
• Families planning how wealth will transfer after death.
• People who have received an inheritance or gift and want to understand their options. 

Advice-seeking is one of the key strategies used by wealthy families to ensure their financial decisions are properly considered, sound, tax efficient, and structured to optimise financial outcomes. It’s a strategy that should be considered by all baby boomers and inheriting generations as they make these important financial decisions.  

It can be tempting to spend an inheritance quickly by paying off debt, buying a car, going on a holiday and putting money in a savings account, but acting too fast can limit your long-term financial benefit. For example, let’s say you inherit a sizeable estate comprising the family home, an investment property, shares, savings, and superannuation. In total, the estate could be worth in excess of $3 million, which (if managed properly) could go a long way towards creating inter-generational wealth for your family.  

By seeking advice, you can explore all available options and create a financial plan designed to achieve your goals both now and in the future. It can also provide an objective view during times of emotional hardship, when clear and measured financial decisions may be harder to make.  

The same applies to baby boomers who want to explore effective ways to achieve their own goals later in life while providing financial support to children, such as helping with a home deposit. A skilled financial adviser can help you answer questions like: What is the best way to transfer funds? What assets should be sold or wait to be transferred? Are our financial plans designed to be tax effective?

Additionally, you can ask your adviser to conduct scenario modelling to show the potential results of your decisions, so you can manage your money with a complete picture in mind.
 

FOR MORE INFORMATION

For a confidential discussion about wealth transfer and inheritance strategies with RSM’s financial advisory team, please contact your local RSM office.