The Law: Indonesia's inheritance tax Framework for Foreignersinheritance taxn inheritance tax (Pajak Warisan) applies to ALL assets located in Indonesia, including leasehold and freehold villa interests held by foreigners. The rate structure: 0% for transfers to direct descendants up to IDR 5B ($500K), 5% for $500K-$1M, 10% for $1M-$2.5M, and 20% above $2.5M. Critically, the Indoninheritance taxDTA does NOT cover inheritance tax — only income tax. Your Australian will is not valid for Indonesian inheritance taxal framework governing Bali inheritance tax requires separate Indonesian estate planning.

The Cost of Getting It Wrong

A $600K villa passing to Australinheritance taxthout proper Indonesian estate planning triggers: 5% inheritance tax ($30K) on the villa value, plus 10% capital gains tax on the deemed disposal ($60K on $600K), plus Australian executor fees (3-5% on foreign assets = $18K-$30K). Total: $108K-$120K lost to avoidable taxes and fees. Additional costs if the villa is held through a nominee structure: Indonesian courts may freeze the asset during probate (12-24 months), during which no rental income is generated. The real Bali inheritance tax cost for most Australian families: $100K-$150K.

How to Structure It Correctly

Four legal structures minimise Bali inheritance tax impact. Structure 1: Joint ownership with spouse (passes automatically at first death, defers tax to second death). Structure 2: PMA company ownership (shares pass under Australian law, avoiding Indonesian probate). Structure 3: Trust structure with an Indonesian trustee (complex and expensive, $5K-$8K to establish). Structure 4: Leasehold with right of survivorship clause (simplest, costs $500-$1K in notaris fees). Most Australian investors should use Structure 4 with a carefully drafted lease agreement that names beneficiaries.

For a confidential inheritance planning consultation, contact Pertama Property's legal and tax partner network.

Guides: Leasehold vs Freehold, Due Diligence, Financing.

External: ATO foreign estate | BKPM | Smartraveller.

FAQ

Does Australian inheritance tax apply to my Bali villa?

Australia abolished inheritance tax in 1979. However, the ATO treats the transfer of your Bali villa to heirs as a deemed disposal for capital gains tax purposes. Your heirs pay CGT on the gain from your original purchase price to market value at your death.

Can I use an Australian will for my Bali villa?

No. Indonesian law requires a separate Indonesian will (Surat Wasiat) registered with the local court. Without it, your villa enters Indonesian intestacy law, which prioritises Indonesian heirs over foreign beneficiaries. Many Australian wills for Bali property are legally ineffective.

What happens to my leasehold when I die?

A leasehold interest passes to your named beneficiaries if the lease includes a survivorship clause. Without this clause, the lease may revert to the landowner. Always negotiate right of survivorship into your lease agreement at the time of purchase — it costs nothing but saves everything.

How much does proper inheritance planning cost in Bali?

Basic planning with a survivorship clause: $500-$1K in notaris fees. Comprehensive planning with Indonesian will and trust structure: $5K-$8K. Cost of NOT planning: $100K-$150K. For $600K+ villas, comprehensive planning pays for itself 10x over.

Can my children inherit my Bali villa directly?

Yes, but with restrictions. Indonesian law limits foreign direct ownership of land. Your children inherit the leasehold interest or beneficial ownership, not the freehold. They must be Australian residents to maintain the lease. If they become Indonesian residents, they may qualify for different structures.

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