The federal government should seriously look into reinstating inheritance taxes, Anglicare Australia argues in a report released on Friday.
Inheritance taxes were abolished in Australia in the late ’90s, even though they are proven to reduce inequality and are more efficient than other existing taxes.
“Australia is becoming more unfair and more unequal,” said Anglicare executive director Kasy Chambers.
“Our research shows that we are one of the only countries in the OECD that doesn’t tax big inheritances.
“This has turbocharged inequality, concentrating wealth among a smaller and smaller group of people.”
Anglicare is calling for a tax on high-value inheritances above $2 million, not including the family home, which would avoid placing additional burden on low- and middle-class households.
In recent years, Australia’s taxation burden has increasingly fallen on working Australians through personal income tax while taxes on wealth, such as capital gains and land taxes, contribute a relatively small proportion, in part due to generous concessions.
That wealth can be passed on virtually tax-free, entrenching generational equality and making it harder for people without privileged upbringings to achieve financial security.
“We should be using our tax system to make Australia fairer,” Ms Chambers said.
“Instead, government policies are driving inequality and making it worse.”
Former Treasury secretary Ken Henry extolled the benefits of inheritance taxes in his landmark tax review under the Rudd Labor government.
“A bequest tax would be an economically efficient way of raising revenue and would allow reductions in other, less efficient taxes,” his report said.
But rather than recommending its introduction, he merely suggested community discussion and consultation on the options, “given the controversial history of bequest taxation in Australia”.
At the last two federal elections, Labor was assailed by scare campaigns claiming they would institute “death taxes” if elected, despite having no plans to resurrect an inheritance tax.
Australia Institute chief economist Greg Jericho says such proposals are easy to malign, despite the fact they would benefit the majority of the population, because average Australians are sold an aspirational dream.
That’s evidenced in the backlash to the government’s proposal to reduce tax concessions on super accounts with balances greater than $3 million.
“Most people have no idea what their super balance is,” Dr Jericho told AAP.
“And so it’s very easy to spread a fear campaign suggesting that that’s going to hit lots of people. Whereas, in reality, it will hit 80,000, less than a per cent, of everyone with a super balance.
“That’s the unfortunate thing with these types of attempts to reduce inequality. It’s very easy to run a scare campaign, and it’s painted as looking after average Australians, whereas, in effect, it’s ensuring that the wealthiest Australians continue to get even more wealthy.”
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