Tax benefits of charitable bequests in Australia

In Australia, charitable bequests to registered DGR (deductible gift recipient) charities are generally exempt from capital gains tax, can avoid stamp duty in some cases, and don’t form part of the executor’s taxable estate income. The result is that 100% of the bequest reaches the charity rather than being eroded by tax.

CGT exemption

Section 118-60 of the ITAA 1997 exempts gifts of property to DGR charities from CGT. This means appreciated assets (shares, property) gifted to charity at death don’t trigger CGT – while the same asset gifted to family does.

Estate-level tax planning

Estates with significant capital gains can benefit from directing CGT-bearing assets to charity (no CGT) while leaving cash and other assets to family. The net effect is more for both the family and the charity.

Charity tax status

The recipient must be a registered DGR (deductible gift recipient) for the CGT exemption. Most major Australian charities are DGRs. Verify status with the ACNC register before drafting.

International charities

Bequests to overseas charities have different tax treatment – usually no Australian DGR-equivalent benefit. Sam can advise on structures (Australian-registered overseas-aid funds) that achieve the same effect.

Summary

Charitable bequests can be one of the most tax-effective ways to leave a meaningful gift. Here’s how the tax treatment works.

Talk to Sam about your situation

If this article raised questions for your own circumstances, Sam Michele offers free 20-minute initial consultations. Learn more about our gifts in wills work, or book a consultation.

Related reading

• How to leave a charitable gift in your will
• Is there an inheritance tax in Australia?
• Gifts in wills