A study conducted by researchers at the University of South Australia suggests that contrary to long-held political opinion there may be an appetite for the introduction of an inheritance tax or, as it’s more commonly known, a ‘death tax’.
The inheritance tax in Australia has been a controversial subject for decades since being removed by the Fraser government in the 1980s. Generally considered a key method of addressing wealth inequality, Mr Fraser’s move was not replicated by many other major developed economies and Australia remains an outlier to this day.
“Inheritance drives wealth concentration and economic inequality, meaning there is a strong case for wealth transfer taxation as an important element of government redistributive policy,” says study author Dr Veronica Coram.
“In contrast to many OECD countries, Australia has not had estate or inheritance taxes for 40 years and little is known about contemporary public attitudes towards wealth transfer taxation.”
Read: Most Australians support a tax levy to improve aged care
But attitudes may be changing as Australia’s ageing population has led to a much smaller tax base, and consequently lower government revenues.
A report from the Tax Institute suggests the nation is approaching the largest intergenerational transfer of wealth in its history.
“It is estimated that over the next two decades, Australians over 60 years of age will transfer $3.5 trillion in wealth,” the report says.
This may sound like a windfall for the younger generations, but the Tax Institute report also notes that this already concentrated wealth will most likely concentrate even further.
“Notably, around 78 per cent of the estimated wealth transferred will go to roughly 20 per cent of recipients,” the report states.
Read: Calls for inheritance tax and GST hike to fix broken tax system
Dr Coram’s report found that rather than the hostile attitudes expected, public opinion among older Australians had softened on the subject with more than two thirds of respondents indicating they would be supportive of taxes on estates worth more than $3 million.
“Most participants simply had no objection to wealth transfer taxation. Their support was based less on reasons why these taxes should exist than a lack of reasons why they shouldn’t,” Dr Coram told The Australian.
She also suggested the change in thinking may not be for purely altruistic reasons, and may reflect “a near universal lack of any bequest motive”.
“The results align with previous Australian research finding that a ‘me first’ individualism has largely replaced any sense of duty of passing down wealth to adult children,” Dr Coram suggests.
But this conflicts with findings from our own YourLifeChoices 2021 Insights Survey, which found that more than 72 per cent of respondents intended to leave an inheritance to their family.
Read: Boomers spending kids’ inheritance
The survey also showed that their intention to leave an inheritance was not restricting them financially in their lives today (more than 74 per cent said it did not impact them), which flies in the face of Dr Coram’s assertion.
The YourLifeChoices data also revealed that more than 90 per cent of respondents opposed any form of tax on the family home, but is an inheritance tax a way for governments to tax the home by stealth?
Whichever way the government moves on inheritance tax, it is clear the old beliefs are not as set in stone as they once may have been.
Would you support an inheritance tax for estates over a certain value? Do you intend to leave an inheritance? Share your views in the comments section below.
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