Controversial $10 billion push to tax inheritance in Australia: 'Once-in-a-generation opportunity'
The Australian government could soon tax your inheritance if a think tank's proposal is adopted. The Australia Institute put forward three concepts to help the country rake in more revenue without impacting low-to-middle income residents.
One of those suggestions involves the reintroduction of an inheritance tax, with the think tank estimating it could generate $10 billion per year. Matt Grudnoff, Australia Institute senior economist, told Yahoo Finance it might not be popular for some, but it could go a long way in paying for essential services.
"Inheritance tax is a once-in-a-generation opportunity... and it can be quite a large revenue source," he said.
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Australians have endured inheritance taxes in the past, which have also been called death duties.
Federal and state levies were imposed on recipients in the wake of someone's death; however, these were abolished in the late '70s and early '80s.
Capital Gains Tax (CGT) was introduced in the mid-'80s as a way of taxing certain assets, but that only applies if that asset grew in value after being given to the recipient.
Fast-forward to now, and the Australia Institute believes it's time to bring back a tax on inheritance, but only for the super wealthy.
It hopes the idea will be discussed at the government's economic roundtable this week.
The pitch comes ahead of a projected $3.5 trillion wealth transfer over the coming years as Baby Boomers and the Silent Generation offload their assets to younger Aussies.
Do you want to tell your inheritance story? Email stew.perrie@yahooinc.com
How would a 2025 inheritance tax work?
The think tank didn't propose what that tax rate would be, but Grudnoff said it would apply to the top 5 per cent of people across the country, or those with $5 million to $10 million worth of inheritance to offload.
As for the $10 billion per year projection, that was based on how much the tax brought in for Australia's GDP when it was at its peak and adjusted for current economic conditions.
The tax would apply to inheritances given after someone had died, as well as if it was gifted before they passed, which has become a popular trend to help young people get onto the property market.
"I understand that it's controversial in the media, in the general public, and amongst politicians, but if you talk to economists, they agree that inheritance taxes are a good form of tax," Grudnoff told Yahoo Finance.
