Calls to change inheritance laws

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There are calls to introduce an inheritance tax in Australia after research revealed that current legislation actively subsidises inheritances.

As part of the Grattan Institute research on how the younger generations are falling behind financially, which we presented on Monday, there were also findings related to the size of inheritances, and who was benefiting most.

Owain Emslie and Danielle Wood from the Grattan Institute found that 80 per cent of money passed down from parents goes to people aged 50 or over, not people who are saving for a house or trying to raise a young family.

The most common age bracket in which people receive an inheritance from parents is 55-59. This is largely due to Australia’s growing life expectancy.

The Grattan Institute report argues that this will mean inheritances increasingly supplement the retirement savings of middle-aged Australians rather than helping young people.

Australia is one of only seven OECD countries without any inheritance, estate or gift taxes, but the problem goes beyond that, according to the report.

Mr Emslie and Ms Wood found that Australia’s taxation system actively subsidises inheritances.

Superannuation tax breaks that were intended to encourage people to save for their retirement and to take pressure off the Age Pension system are largely being passed down to the next generation through bequests, because there are many retired Australians who do not draw down on their capital.

There is a 15 per cent super death benefits tax, which aims to claw back some of the superannuation tax breaks when the money is passed on, but the Grattan Institute argues it is too low and can be easily avoided.

As well as recommending a higher tax on super bequests, the Grattan Institute is calling for the cap on post-tax super contributions to be lowered and for at least part of the family home to be included in the Age Pension assets test.

It also suggests that older Australians with higher-value properties should be allowed to borrow against their home using the Pension Loans Scheme. The aim would be to allow most people to stay in their home, while ensuring that some of their wealth is used to fund the Age Pension.

What do you think? Should Australia introduce an inheritance tax? Should the tax on super bequests be higher than 15 per cent? What do you think about including part of the family home in the assets test?

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Written by Ben

150 Comments

Total Comments: 150
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    It’s been taxed and paid for already – why tax it again? Each and every asset purchased out of post-tax income, and which garners no income, should not be considered in any asset test, and ONLY capital gain etc should be considered on an asset passed on.

    I understand that is the case already with property …. those who inherit have to kick in something…

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      Perhaps I’d make an exception of those fat cats who have generated assets after using tax dodges already – different story… and shows the need for genuine tax reform right there…

      Naturally – any business asset such as a serial house as investment is fully taxable.. it’s a business being passed on and thus incurs costs…..

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      I repeat – if I own a Windbag and a boat – these cost money – they do not garner any income – why are they included in assets test? If they are sold, I pay tax on income earned from any cash from the sale, and also it can affect pension if kept as a lump sum.

      Meantime Joe Business doesn’t own anything, gets full pension, and when the Windbag or boat is sold off, it is written down as a business thing ….and since business interests are not his personal interests, nothing affect his pension…

      Pensioner is hit every which way. Grand Theft Canberra….

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      They’re after the family home Trebor. You correctly mention that tax is paid on investments anyway and that should not change.
      The biggest dishonesty in the system now is CAPITAL GAINS TAX and how the bastards want it calculated. Unless the REAL rate of inflation is locked in, it isn’t, then the increase in value of a taxable asset is unfair because the buying power of a dollar diminishes with inflation. You may have made a capital gain of 100% on a property which cost you $500,000 on sale but this needs to be adjusted for the loss in value of money like it used to be. The intent is to equate the nominal gain as a real gain. Totally crooked!

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      …and the younger generation won’t benefit at all if inheritance is taxed.
      If its not the nursing home industry fleecing children’s inheritance its the some Grattan Institute employee who has been reading the communist manifesto.

      Inheritance takes the burden off the welfare system. Inheritance allows children to build upon their parent’s hard toil. Inheritance tax causes a huge burden on families.

      Watch the Greens. They are into abortion, euthanasia and inheritance tax. People think they are into saving trees – they need to read the fine print. Changing their policy to get votes for the 2018 election doesn’t change their ideology it just adds to the list of deceptive behaviour.

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      Yes MICK I thought when Howard made that change there was something sneaky about it all. Depreciation was a much better option and fairer.

      If they keep upping the gains tax and make it on $$$ value without adjustments they can cream off most of the wealth from the past 20 years house price gains.

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      Rosret – We have to realise The Greens are a political party of millennials who think they are hard done by and seek to blame their parents for the hardship of life. Guess who they’d like to scalp? And as you rightly say THEY will then get a zero inheritance. Some poetic justice perhaps given the bank of mum and dad is the ninth largest bank in the country…and still we are the bad guys.

      Rae – correct. Just consider what will happen with CGT on assets, including the family home should the current crooked government get it through, if we have rampant inflation for a couple of decades. Effectively the government will end up with almost HALF of the inheritance under current CGT rules because the value (=selling price) will end up being many multiples of the purchase price. Its a ticking time bomb where the casino has worked out how to steal everything from its citizens.
      If that comes about we’re out of this country and will leave those who voted for this sort of corruption here to get what they truly deserve. Hopefully we will see the back of this lot despite the Murdoch and Stokes media campaigning for their private government giving them their much called for tax cuts. Not a wonderful future if it happens. We’ll see of course and perhaps common sense will see this lot kicked out. I live in hope.

  2. 0
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    Here we go again tax tax tax…… sick to death ( no pun intended) of this!!!! But it will happen no matter what majority want …. starting to worry about democratic world…. too many rules and too many taxes!!

    • 0
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      This is just the next tax being worked out by crooked government which refuses to be accountable for how it spends our money and then cooks the books for more. It will not be content until it gets all income and we’re all living in poverty.

    • 0
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      it’s not just this government looking at estate duties. The only countries that do not have these taxes besides Australia are Austria, Brunei, Canada, Chile, Czech Republic, Estonia, Honk Kong, Hungary, Israel, Liechtenstein, Luxembourg, Macau, Mexico, New Zealand, Norway, Portugal, Russia, Serbia, Singapore, Slovakia, Slovenia and Sweden.

      https://nomadcapitalist.com/2018/05/17/how-to-avoid-estate-taxes/

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      Yes but those countries don’t have Johnny Howards crazy Capital Gain without taking inflation into account nonsense that means it’s better to buy and flog than to buy and hold.

    • 0
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      Farside – hang on a minute mate.

      In Australia holiday homes are NOT tax deductible. They are in some other countries.
      Other countries do NOT have an assets or even income test to push retirees off a pension. We do.
      Other countries have generous tax regimes if you live in certain states. We do not.

      You may want to compare apples with apples rather than cherry pick Farside. Australians are paying a high amount of tax and I find it obscene that a destitute government which has wasted hundreds of billions of OUR dollars is now sniffing around to find a way to hit us again. That’s where this argument is at and anybody who sees a Grattan Report as anything other than propaganda straight from Canberra is fooling themselves. This is softening us up for what the bastards in power are going to do. Make no mistake about that.

  3. 0
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    Ben – your article is promoting the blatant dishonesty of the far right wing Grattan Institute. This crap comes straight from Liberal Party HQ softening us up for what they intend to do in the future when the free money runs out and they have no more taxpayer money to waste.
    You may want to do several things to put this so called ‘report’ into the rubbish bin where it belongs:

    1. discuss the pension system in other first world countries. You won’t find an assets test and you will find that out system pays a lot less than other comparable first world countries.
    2. discuss the fact that family homes as well as holiday homes are tax deductible in some countries. Not here. That makes a huge difference during a working lifetime!
    3. discuss that there are tax breaks in countries like America depending on which state you live in.
    4. discuss our high personal tax rates compared to countries like America.

    The problem with your spiel is you are regurgitating propaganda from a government funded outlet and you fail to discuss the lies in the report or indeed issue like big tax cuts for the top end of society. Australia should NEVER adopt some of the measures in this report and the top end of town will sidestep any such legislation anyway, so the calls for a Death Tax (remember that the government claimed Labor was bringing one in during the election?) will only be borne by the working and middle class. As intended!

    • 0
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      Your 4 points are spot on. I have lived and worked in places Mick describes – low tax countries have impositions we do not: compulsory health insurance, TV and Radio licences, memberships for usage of council libraries. No deductions for public transport, no rego help and a lower tax threshold and an asset tax as well.Thanks Mick for above input. We are better off by far than our mates in the often admired northern countries in Europe.

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      I think you will find its not the LNP at all. Take a good look at the other parties ideologies – especially the Greens who are controlling the the Labor party at the moment.

    • 0
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      The Grattan Institute was introduced by Labor!!!

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      Melbourne Mercer Global Pension Index reveals Australia is the only country outside North-Western Europe countries in the top five countries with world class pension systems. The Netherlands, with an overall score of 80.3, beat Denmark to first place, a spot held by Denmark for six years, by 0.1. Finland bumped Australia (72.6) out of third place with an overall score of 74.5 and Sweden (72.5) coming in fifth place.

      Seems the Australian system, ranked 4th in 2018, is not that bad, especially since it took a hit the previous year with the changes to the assets means test, that would otherwise have seen it ranked second.

    • 0
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      Rosret – it appears you are posting party BS again. I acknowledge what The Greens would do if in power but they are a minor party and Labor made it crystal clear they would not govern in partnership with The Greens.
      As a mater of interest you may wish to listen to Di Natalie when he get s (very) rare airing. He tells the truth about the corruption in Canberra and whose interests are being served in the country. Whilst I hate some of the twisted behaviour of senators like Hanson-Young I applaud honesty. Both our current government and Labor have little of that and the only thing which sets these parties apart is Labor will not act corruptly against the national interest whilst this government will and does all the time.

      Be careful who you vote for. Those of us who voted for their bank accounts recently may at some time wake up to the fact they have bullet holes in both feet. Its the classic lobster in the (cold water) pot where the temperature rises gradually until we’re done for. Enjoy the misery if you were one of the above folk. I was prepared to burn my franking credits and stand with my head high. Many in this community could not say the same and that is really sad for the future.

    • 0
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      There is no right to property residing in the population, no right to privacy … well… no rights…

      Elsewhere today I drew a comparison with SloMo’s attack on GetUp – an organisation that has been ‘cleared by the AEC of any connection with Labor or Greens – as being comparable to a Hitlerite/Stalinist style of governance. I added the state of the unions and workers, and a few other things… and referred the reader to “Rise And Fall Of The Third Reich” (again) by William L Shirer (a non-Jewish German American).

      I seriously think everyone needs to read that book – especially the chapters that deal with social and economic and industrial relations policy and a few other things…

      I had the great fortune to read such books at a comparatively early age, along with a few others of great interest – Mao’s Little Red Book; Mao and Guevara on Guerilla Warfare; Intervention and Revolution by Richard K Barnet….

      I advise some serious reading if we are to save the nation from itself….

      As for the sellout across the board to foreign interests – what ARE these politicians smoking before they get out of bed in the morning? Bet it comes in brown paper bags….

    • 0
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      Trebor – what you need to do is save voters from their own ignorance, greed and stupidity. The issue is of course the propaganda right wing media. It sold the electorate Morrison on a ‘Scotty’s a good bloke’ campaign and the electorate voted in a party which had self destructed and had no policies other than tax cuts for those who were already wealthy and attacks on unions and any media outlet which dared to speak against the most dishonest and corrupt government we have seen in our lifetime.

      The issue is voters and their own shortcomings. Had we had level minded people this lot could never have gotten in again.

    • 0
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      While I am forced to agree on fact, Mick – it saddens me that modern Labor is the only alternative…

      We, the people, simply MUST get a genuine party going….. like you, if certain things come to pass in this nation, I will be looking to live somewhere else…. or marching on Canberra in a new form of Coo-ee March ….

  4. 0
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    You can twist and interpret ‘research results’ any which way you want, in the same way that ‘stats’ are reported to reflect the bias of those quoting the stats. The fact remains that the ‘inheritance’ has already been taxed and who it is left to is entirely up to the person leaving the inheritance. If the receivers of that ‘inheritance’ wish to share that inheritance with their children, so be it. It’s no ones business but their own. This ‘poor bugger me’ card from the ‘we are suffering because of the oldies’ mob, is the biggest load of bollocks since bottled water.

    • 0
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      I know of far too many younger people, not the slightest bit interested in saving or buying a house because they ‘will get mum/dad’s goodies when they pop off’. I was appalled to hear this conversation at a recent social do, one guy almost rubbing his hands, saying it wouldn’t be long till he no longer needed to pay rent. Why? – because his mum has terminal cancer, dad has deceased, and he is only child. I actually fronted him saying he showed more happiness in what he would be inheriting rather than sadness for his mum’s plight. And his mum does own a beautiful big home on land.
      People should be able to leave what ever they have to whom ever they want. It should NOT automatically go to children. Oh yes, you can write a will that way, but guarantee they will contest it – as I myself have been through. I am single, have worked bloody hard to have what little I have, and I am sick to bloody death of the govt constantly trying to work out ways to get their hands on MY assets and money. What little I have is mine.

    • 0
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      As I said yesterday – it is indeed true that Muslims carry out a minority of terror attacks within the continental US – it’s just that they are 2% of the population and carry out 26% of such attacks – a minority to be sure…..

      Lies, more lies, and damned statistics ….Robert Duvall is related to Abraham Lincoln? So am I .. distantly of course… VERY distantly …..

    • 0
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      Sorry – Robert Duvall is related to Robert E Lee – not Abe…

  5. 0
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    I have to confess, don’t really understand these issues, however – I got a small inheritance on my father’s death. I was in my late 60’s and had been on the pension (Newstart, Disability, Aged) for a long while. This inheritance was a a life-saver for me. I now have 2 adult children, one of whom is a student after Newstart, she won’t have 2 pennies to rub together. Don’t know how long until I pop my clogs, but she will need every cent of the inheritance from me. Leave the inheritance alone!

    • 0
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      Agreed rtrish. – and every cent has already been taxed.

    • 0
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      Agreed with rtish and Rosret . I am sick of the socialists wanting to tax bloody everything . We are overtaxed now Be satisfied with the Government pension and stop complainingand wanting more handouts Why didnt people tax you save more for your retirement independence instead of trimming their capacity to earn income by going on multiple cruises and os holidays ?

    • 0
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      Got it in one, Rosret… exactly what I said in post 1 ….

  6. 0
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    Australia is the only country that has an assets/income test for the pension. So NO, let’s not add to that by taxing inheritance. Besides, who’s going to have anything to leave? Many who are not on a pension will have to use up their entire resources to support themselves in their old age and/or pay for aged care facilities – too bad if they have disabled or sick children…no inheritance for them.

    • 0
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      if you have no estate to leave then the discussion and possibility of inheritance tax is irrelevant … unless you might be a beneficiary

    • 0
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      Again – under this kind of rule, ONLY the wealthy who have the hidey-holes for everything will be able to give an inheritance.

      We raise our children and pour gold into doing so – and we all want to see our children and grand-children prosper…… why should any ‘right’ to give an inheritance only adhere to the wealthy?

      I say to government – get your hands off it!!

    • 0
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      … and the social and economic divides increasingly apparent in this once-great nation will get worse and worse until there is only the company store and the master/servant relationship left….. hundreds of years of upward social movement for the many lost in two generations…. and all turned back to the Dark Ages….

      Who wants to sign up for that?

  7. 0
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    Prefer an inheritance tax to the inclusion of the family home in the asset test. Give everyone a just pension without income and asset test and let everyone pay taxes on their income and assets. Too many pensioners here scrimp and save just to leave an inheritance behind. With an inheritance tax people might be less inclined to save a lot of money and so helping the economy with increased spending. I know it is not the Aussie way, but that is the way of a lot of other countries.

    • 0
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      Lock in C, Eddie – neither…..yes… lock it in… no.. no.. lock in D.. yes D….”No inheritance tax, no family home asset test, and a fair pension for all”..

      Your final answer? I mean… for a millyun dullahs…. you went C… then.. well.. then you went D. WHY would you choose .. D?? I mean…(shakes head)…. D??? You cannot be serious, surely… D?? One final chance… for a millyun dullahs… want me to go back to C?

      No, Eddie… I’ll stick with D….

      Well – it’s your Millyun Dullahs (shakes head)…. and the answer is… right after this ad break…..

      (later)

      You’ve won Wun MillYun Dullahs!!!!

  8. 0
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    This cant be only Labour would introduce a death tax is this another lie

  9. 0
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    Easy fixed. Just make any old age pension received a debt on the person’s estate.

    • 0
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      Very caringBigBear
      What a great idea to encourage everyone not to work and scrounge of the system never working a day in their life’s I know a few of those they are sitting back all laughing in dept of housing some on their own with 3 bedrooms

    • 0
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      It won’t change the behaviour of those people but will help those who struggle now just because they have saved.

    • 0
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      Well that should hit the poor harder than any other group in the community!

    • 0
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      It wont hit the poor at all as they will leave nothing to pay it back. It will however acknowledge those who fund their own retirement rather than the current system that discourages people to fund their own retirement and to hide assets in their own home.

    • 0
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      You are violating the Human Rights of a section of people, Uncaring Bear, if you are penalising age pensioners but not any other age pensioners. Remember the majority of people on a pension will be accessing it because of their age. That raises the shadows of Hitler’s Germany.

    • 0
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      It seems the Actuaries Institute essentially agrees with you. It has published a research paper that includes a proposal for everyone to be given a full age pension, but would “require retirees to use a proportion of all their financial assets to ‘buy’ that proportion of the Age Pension to which they are not entitled, and then pay the full amount to everyone”.

    • 0
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      A paid for already pension is already a form of annuity… we don’t ‘buy’ what we’ve already paid for, Farsie … … we’re not going to go further down that track…

      Simpler to simply pay a universal pension and tax all income etc over and above..

    • 0
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      @TREBOR, the AI green paper advocates a universal pension. The report says “For example, if the Age Pension is worth $800,000 for a couple, then a couple with $1 million of assets at retirement would use $800,000 to buy a full Age Pension. Those with lower assets would have part-pensions, which would be topped up to full pensions, by a similar purchase at retirement. Those with few assets would have full pensions fully provided by the government.”

      https://actuaries.asn.au/Library/Miscellaneous/2019/RetirementIncomesGreenPaperFinal.pdf

  10. 0
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    My question is will the solution be used to fix the problem that’s been identified? That is will any death tax be used to ease mortgage stress amongst the young or is this just another tax grab for consolidated revenue? I suspect the latter.
    We have international treaties to stop double taxation. However you look at it, a tax on peoples wealth, either while they are alive or dead, that has already been taxed is double taxation.
    If money is being left to seniors it surely helps to reduce the demands on the pension system so the government still wins in any case.

    • 0
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      Of course not – consolidated revenue will put paid to any such fantasies ….. all CR requires is to frequently topped up after being spread aro0und like chaff in a high wind…

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