‘No policy justification’ for how little tax is paid by retirees, says government adviser

The new head of the Productivity Commission is pushing for a controversial change in how large inheritances are taxed, saying there is “no policy justification” for how little tax is paid by retirees.

In a speech in her former role as head of the Grattan Institute, Danielle Wood, the incoming head of the Productivity Commission, wants to begin taxing inheritances as part of an ambitious suite of reforms aimed at making the tax base fairer, the Australian Financial Review reports.

In exchange, Ms Wood says the increased tax revenue from inheritances could be used to fund income tax reductions for working age Australians. She says most people aged 50 and under would be ahead financially if that change was implemented.

Ms Wood says the current rules disproportionately favour older Australians at the expense of future generations.

“At a minimum, we should not be subsidising inheritances via some of the existing rules that allow the accumulated value of super tax breaks to be inherited by the next generation, as well as the exclusion of virtually all the value of the family home from the Age Pension assets test.”

The Productivity Commission estimates that placing a 15 per cent tax on inheritances would deliver around $5.3 billion per year in revenue.

Australia is one of just eight developed countries worldwide that doesn’t tax inheritances since abolishing the tax back in 1979.

Ms Wood acknowledges that introducing an inheritance tax would be “political dynamite”, but wants the government to “at least have a sensible conversation” about the proposal.

The AFR article caught the attention of politicians in Canberra, with Opposition members peppering the government in Question Time over where it stands on tax reform.

But the government says it has no plans to even debate introducing an inheritance tax at this stage, with Labor Senator Deborah O’Neill telling Sky News there would be “absolutely no” tax debate and that the Opposition was simply mounting a scare campaign.

“I want to be really, really clear: the answer is no. Absolutely no,” the Senator said.

“But the actual facts of the matter should put paid to the next scare campaign that was attempted today in the Senate at Question Time by some colleagues who … want to create fear and alarm.

“Australians are well able to see through a scare campaign like this. And I want to say very clearly, inheritance tax is not on the agenda.”

Professor Robert Breunig, director of the Tax and Transfer Policy Institute (TTPI) at the Australian National University (ANU), says the inheritance tax idea has a lot of immediate appeal, but may not actually raise much revenue in practice.

“What they [inheritance taxes] do is they generate a lot of tax planning, and I’m worried about that in Australia, particularly because of the really heavy use of trusts that we have,” Prof. Breunig said.

“I think what wealthy people will do is just put their money into a family trust … and it won’t be subject to inheritance tax.”

Would you support an inheritance tax? Or is that unfair on future generations? Let us know what you think in the comments section below.

Also read: Tens of thousands of older Australians ‘gifting’ the tax office hard-earned funds

Brad Lockyer
Brad Lockyerhttps://www.yourlifechoices.com.au/author/bradlockyer/
Brad has deep knowledge of retirement income, including Age Pension and other government entitlements, as well as health, money and lifestyle issues facing older Australians. Keen interests in current affairs, politics, sport and entertainment. Digital media professional with more than 10 years experience in the industry.


  1. Socialists soon realise that they have run out of other peoples money. Margaret Thatcher.

    The government needs to stop wasting tax payers money. The billions spent on consultants should either be curtailed or the public service cut right back. If you need a consultant to do your job you should have a job!

    The NDIS is a minefield of financial abuse . The organisations delivering services need to audited severely to stop government waste.

    All the feel good think tanks, committees and organisations should be made to raise their own funds.

    As for retirees we saved and invested based on one tax regime. There is great political risk in imposing more tax on those who have paid tax all their lives. Introduce a luxury tax such as the UK GST. This would reduce imports as we don’t make luxury goods in Australia. It would make people satisfied with what they have. A perfectly function iPhone for instance. You couldn’t dodge the tax on a new Ferrari.

    Next make GST payable on all EBay, Amazon and other on line goods. Too many sales are GST free. Once the sellers reach the $75,000 threshold they just trade under another name.

    Crack down on unexplained wealth to stop money laundering and drug crime. A national register of property ownership cross checked against income would be simple. If you own and insure a Ferrari and live in housing commission isn’t that a red flag?

  2. Maybe the government could stop paying for obscenely expensive items like nuclear submarines etc and use that money for more worthwhile projects. Keep in mind that superannuation has already been taxed. Go after the corporate tax evaders as well!

  3. No of course there shouldn’t be inheritance tax. What next a window tax. The possessions you leave to your loved ones have already been taxed sufficiently. Regarding the Grattan institute I feel it should be disbanded,

    as all I ever hear of their submissions are complete nonsense in most cases and stupidity in others. These people have got to keep coming up with novel ideas to justify their existence. A great way to save money would be to terminate their existence. Perhaps Ms. Wood would be better served learning to clean cook wash and sew for hopefully her future job as a mother for which she was designed. Jacka.

  4. Goodness me.
    This is no longer the country I worked so hard to improve.
    No respect for age.
    This govt is just too far to the left.
    Moonbeams talking about more tax rather than talking about reducing unnecessary expenditure.
    Where are the principles that John Howard introduced. Fair go for all.
    If ministers did their jobs properly the disadvantaged indigenous would not need a voice because they should be a priority in govt spending.
    More bureaucrats in Canberra are not the answer.
    I want the existing system to supply the services to those on the ground not in Canberra.
    More tax is not the answer, it’s the management of the money.
    The waste of money by the abc should be diverted to directly helping the disadvanted.

  5. NO INHERITANCE TAX FOR ME. As a woman in her 70’s we had very little super because of the way things were structured in our working lives. Inheriting some money from my mother’s property when she died has enabled us to at least pay all our medical expenses, private health and have some also for a rainy day.
    We had already paid off our mortgage and had been through the 18% interest rates so not had it easy and not many luxuries. Let our kids get the same when we go. Go after the Harvey Normans of the world who didn’t pay back the covid money and those other foreign companies sending profits offshore.

  6. I would like to give Danielle Wood some advice, however it is not printable on this site. Those of the Baby Boomers who have worked all their lives, paid taxes and saved for their retirement, are sick and tired of the do-gooders now wanting us to keep paying through the nose. Those who have the money to hire the clever people to manage the trusts and thus only have to pay those costs instead of the exorbitant taxes will benefit. The ordinary people having carefully planned their future will once again be stung.
    My advice is to stop giving those who have never worked a day in their lives through laziness or just not wanting to, money to waste on luxuries such as cigarettes, alcohol and free entertainment. Politicians and Judges also do not need big pay increases. To give one person a wage increase equivalent to another person’s yearly wage is unreal and unethical.

  7. Not again. Somebody is always after the retirees money. If it is not superannuation they are after, then it is “death taxes”. ‘Death taxes” is a much more emotive word, so I prefer to use that. That will make Danielle cringe a bit or she probably doesn’t care.
    We have worked very hard putting money into superannuation, which is taxed at 15% when money goes into super. We played by the rules, so that we will have enough money to live and do some fun things. No I cannot afford a Ferrari etc. A second hand car will be OK one day when my 10-year old car dies. We use our super to live on so we do NOT have to be dependant on the Government handout. As everyone knows, Government handout comes from taxes they collect from working people. So we are not ‘chewing into’ taxes that Govt collects from the working people. If I have to rely on Government handout, it comes out of tax coffers.
    Now they want to tax the inheritance that our kids will get i.e. the house that we live in. This is such a stupid idea that I will not dignify it by swearing at her. Her “death taxes” idea is contemptable. She probably earns $700k – 800k, so how would she understand what retirees have to do to live their lives.
    Why don’t they consider taxing large corporations and very rich people. Now that is a novel thought. Also how about closing some of the loopholes mentioned by other contributors.
    If any political party considers “death taxes” they will get voted out.
    A note to younger people. If your inheritance is taxed, that means you will get less money to be able to pay off your mortgage or make your life easier. So consider it when it comes time to vote if any Government proposes this idea. You guys loose as well. And you will need to retire one day. So the Govt will come after your money!!

  8.  Ms. Wood says the current rules disproportionately favour older Australians at the expense of future generations.
    Really? Are the beneficiaries of inheritance generally older Australians.? I would have though that nearly all inheritances were received by the next generation, exactly the people that Ms Wood wants to target?

  9. My parents went through the Great Depression and the 2nd World War. In my working life I paid my tax, which partially contributed to their government pension. Did I ‘bitch about it’? Of course not. Why? R E S P E C T and recognition of the hardships they went through.

    Paul Keating introducted compolsory Superannuation in 1991 – half way through my working life. Unlike the millions of fellow Australians born subsequent to that date, they will have a life time of work to build their super sufficient to live out their retirement with DIGNITY. A luxury I amd most of my generation will never have. I ONLY have a house that I can pass onto my offspring upon my demise. NOW, some witless millenial wants to introduce an inheritance tax??? Sure, have one but start it for those who have had a .working. lifetime of tax concession Superannuation for the WHOLE of their working life.

  10. Boy! So many of these young people have a real jealousy & dare I say, hatred, for seniors who have worked hard during their lifetime. I have always been single, working often in low paying jobs, and doing odd jobs for extra dollars. If I could, I’d add after tax money to my super. My only overseas trip was 35 years ago to NZ, I was driving a 23yo car, and gave up allot of social life, my main aim to own my home when I retired. Now these lazy sods want to punish me. If anything, we should be getting tax relief, as more seniors are working, often because younger ones would rather be on Centrelink.

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