The Death Duty Debate: Should We Tax Inheritance?
The resurrection of death duties. It may just be the will of the people!
Death duties may be back on the table partly because our kids apparently don’t expect a free handout when us parents ‘predecease’ them.
And governments may use this social development to argue for the return of 'death' and estate taxes to haunt families again.
New social research says older Australians increasingly want to spend deep into their nest eggs rather than pass any savings and super on to their children.
But what's truly surprising is that their children are happy with the situation, saying that they are not owed anything and can make their own way in life.
The University of South Australia study (see here) into present attitudes about intergenerational wealth transfer also found the public's antipathy towards inheritance taxes had declined.
It's 40 years since they were abolished, and as the only major form of untaxed income, it’s argued restoring them may be both an opportunity for tax reform and addressing social inequality.
According to Dr Veronica Coram from the university's Australian Alliance for Social Impact, it's called the decline in the bequest motive.
"We talked to young adults and senior Australians, and two-thirds of them thought Australia should consider reintroducing taxes on estates worth more than $3m, while only one in ten were definitely opposed.
"Inheritances generally go to people who are already well-off and don't need them; they encourage inequality and inhibit social mobility….Reintroducing inheritance or estate taxation is a way of increasing government revenue while reducing a key driver of inequality at the same time."
We had inheritance taxes until the 1970s when the cunning political operator Queensland Premier Sir Joh Bjelke-Petersen abolished them to attract interstate grey migrants. The federal government of Malcolm Fraser then followed suit.
So how do you feel now? Is it time to accept that social norms have shifted and it's fair for the government, as happens in many other nations, to tax inheritances?
And if this happens, is it more likely that older Australians will indeed spend deep to avoid the taxman even if it means less in their wills for the kids?
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