Aussies warned of 'inevitable' return of inheritance tax amid ...

Australians are facing renewed warnings that the introduction of an inheritance tax is increasingly inevitable as the country confronts an unprecedented intergenerational wealth transfer, according to Yahoo Finance reporting. Australia stands among the final developed economies operating without an inheritance tax. Legal professionals caution that the sheer scale of upcoming demographic shifts will prove irresistible to future policymakers seeking new revenue streams.

A prominent estate lawyer has warned Australians shouldn't be surprised if a new death tax is on its way, as the massive wealth being transferred between generations will become too tempting for the government to pass up, according to Yahoo Finance reporting. Morgan Solomon, director of Solomon Hollett Lawyers, stated that the situation will likely change in the future, speaking on The Money Puzzle Podcast published by The Australian.

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As Australia enters the biggest intergenerational wealth transfer it has ever seen, a staggering sum of $5.4 trillion is expected to be shifted from Baby Boomers down to younger generations in the coming decades, according to Yahoo Finance reporting. Solomon argued that if an inheritance tax were to happen, it would mirror increased taxes for Australians with superannuation balances above $3 million. He noted that whispers have suggested thresholds for estates over $5 million, though he suggested a figure of $10 million-plus would be more appropriate given that family homes and multiple beneficiaries quickly evaporate smaller amounts.

Public sentiment remains starkly opposed to any prospective death duties. When polled on the possible return to inheritance taxes, three quarters of more than 7,500 Yahoo Finance readers were completely opposed to the idea, with just 2 per cent in favour, according to Yahoo Finance reporting. Historical context shows Australia previously had inheritance taxes, but these were abolished in the late 1970s due to being widely unpopular with voters.

Political figures have downplayed immediate implementation risks. Following the release of the latest Intergenerational Report in late September, Treasurer Jim Chalmers was asked if the government was considering bringing back inheritance taxes to help even the playing field, according to Yahoo Finance reporting. While Chalmers admitted there are certain intergenerational pressures, he stated that the Labor government is not considering putting an inheritance tax on the table.

"When it comes to intergenerational wealth, the most important thing we're doing is reforming the housing market by reforming the tax system"

Jim Chalmers, Treasurer, via Yahoo Finance

A large part of that reform involved changes to the capital gains tax. However, critics of this change have argued it will make it harder for younger Australians to build wealth on their own compared to previous generations who experienced more generous investing tax concessions, according to Yahoo Finance reporting. Making it harder for younger Australians to build investment wealth outside superannuation could further the divide between those receiving an inheritance and those who will not.

Economists continue to advocate for wealth taxation as a necessary structural tool to prevent public service shortfalls. Australian Institute senior economist Matt Grudnoff previously told Yahoo Finance that inheritance taxes are a good form of tax, pointing out that Australia is really bad at taxing wealth and taxes it really lightly, which has consequences that either mean fewer services or heavier taxation in other areas.

"Inheritance tax is a once-in-a-generation opportunity... and it can be quite a large revenue source"

Matt Grudnoff, Senior Economist at Australian Institute, via Yahoo Finance

The institute proposed that an inheritance tax could be aimed at the ultra-wealthy and only apply to the top 5 per cent of people across the country, estimating that doing so could generate $10 billion per year, according to Yahoo Finance reporting. Furthermore, Solomon suggested on the podcast that any government deciding to reinstate the tax may favour the British model rather than the previous Australian system, noting that in the UK spouses could directly inherit estates without paying inheritance tax, and no inheritance tax was paid if the estate value was below £325,000 ($620,000), with a sliding tax scale thereafter.