Australia markets open in 7 hours 22 minutes

    -63.50 (-0.77%)

    -0.0026 (-0.38%)
  • ASX 200

    -64.90 (-0.81%)
  • OIL

    -2.57 (-3.10%)
  • GOLD

    -53.60 (-2.18%)
  • Bitcoin AUD

    +180.85 (+0.18%)
  • CMC Crypto 200

    +52.12 (+3.91%)

Inheritance tax in Australia ‘bound to happen’

Pictured: Australian cash and TAX written out, busy Sydney street. Images: Getty
Death taxes are practically inevitable in Australia. Images: Getty

Australian taxpayers are “bound to” be hit with an inheritance tax, a financial adviser has said, pointing to similar policies in the UK and US.

Chief of financial advice firm Stanford Brown, Jonathan Hoyle, said an inheritance tax was an inevitability in Australia as the country's current position was unusual and unsustainable.

“The UK has very punitive rates of inheritance tax, I'm sure they'll come here. In Europe we're seeing [a] wealth tax... it's bound to happen,” he said, naming intergenerational envy a problem.

“The Coalition's decision to limit the amount of tax-free superannuation is the start of making super less attractive for everybody but particularly the very wealthy and we expect to see many more measures that will limit the amount of money in tax-free super."


The next step will be an inheritance tax.

He said that as an adviser, he works with high net-worth clients who begin considering their retirement in great detail in their 50s.

“Retirement planning is a three-decade process - for couples in their 50s, this [plan] is going to last a long, long time.

“One of the things that's probably going to happen [during their retirement] is an inheritance tax. That’s about 40 per cent in the UK, so you've probably got to get used to the idea that there will be an inheritance tax here.”

Australia abolished death duties in 1979 due to their relatively low exemption thresholds, poor consideration for the effects of inflation and the challenges they could place on widows and family businesses like farms.

While the United Kingdom’s 40 per cent inheritance tax rate is high, those in Japan face 55 per cent levies. However, in Italy the tax rate is relatively lower at just 4 per cent.

Is an inheritance tax the solution to housing affordability?

According to Australian Institute for Business and Economics director, Professor John Mangan, an inheritance tax could be the solution to Australia’s housing affordability challenges.

In a March report for the University of Queensland, Managan said inheritance taxes present “an opportunity to capture a portion of this tax and apply it directly to address housing affordability, reducing less equitable or efficient forms of tax, and or funding expenditure – such as education – aimed at improving equality of opportunity”.

He said that the rate of home-ownership among 25 to 34-year-olds has fallen from 60 per cent to 45 per cent between 1981 and 2016, while the wealth of older households has grown.

According to the Australian Institute of Health and Welfare, the proportion of Australians renting has gone up as the amount of money spending has also increased, and in 2017-18 more than a million low-income households were in housing stress.

“If housing affordability concerns persist, inheritance of property can further drive wealth disparity,” Mangan said.

“By redistributing a portion of inheritance taxes to issues like housing affordability, we allow more people to enter the housing market without the benefit of inheriting a home or money from their parents, creating more equal opportunity.”

A fatally unpopular ‘policy’

While Hoyle believes an inheritance tax in Australia is inevitable, it’s politically unpalatable.

This year’s election saw the Labor Party hit with misinformation over incorrect claims it had plans to introduce the tax, despite it having no such policy.

Treasurer Josh Frydenberg claimed the Labor Party had plans to introduce the policy.

“Given Labor is already proposing to tax Australians from the cradle to the grave, it is certainly not out of the question that Labor would consider taxing people beyond the grave,” Frydenberg said in January.

Source: Facebook
Source: Facebook

A scare campaign on Facebook also went viral, with Labor ultimately writing to the social media platform asking it to take action on the viral content.

Make your money work with Yahoo Finance’s daily newsletter. Sign up here and stay on top of the latest money, news and tech news.