My wife will be inheriting a substantial amount of money from the sale of her mother's house who just died in Australia. After she receives her payout in Australian money, she will need to convert it into US dollars. Will she owe any tax on this influx of cash here int eh USA? She is selling it essentially within a few weeks after her death so there is no step up in basis. Will this money be considered income as far as her tax return is concerned?

In the U.S. there is no tax on inheritances. Even if your wife is a U.S. person, she does not pay any tax the on inheritance.

Her cost basis is the FMV at the date of death. She may have to report the sale on schedule D if she had a profit.

You may still need to file Form 3520. Read: Your U.S. Tax Return: Tax on Inheritances