Join

Enter Details

Comment on stories, receive email newsletters & alerts.

@
This is your permanent identity for Business Insider Australia
Your email must be valid for account activation
Minimum of 8 standard keyboard characters

Subscribe

Email newsletters but will contain a brief summary of our top stories and news alerts.

Forgotten Password

Enter Details


Back to log in

This charity group thinks a $5 billion death tax on the super rich is the solution to Scott Morrison's budget problems

The inevitables – death and taxes. Photo: Getty/ John Moore

Charity leader Tim Costello has raised the idea of reviving estate duties in Australia for the super rich, claiming it could tip an additional $5 billion into federal coffers.

Costello, CEO of World Vision and chair of the charity lobby group Community Council for Australia, is hoping the move will also funnel an additional $100 million annually into the charity sector as the wealthy sought to avoid paying the death tax.

Australia abolished estate duty in 1979 under Malcolm Fraser and then treasurer John Howard, the first wealthy country to do so, and since then politicians regard it as electoral poison whenever the spectre of a death duty is raised.

One proposal being floated is similar to the US model, where, while some states have death duties and others have abolished them, the federal estate tax kicks in on assets worth more than $5.45 million, which are subject to a 40% tax rate. Only 0.2% of estates in the US pay the tax.

When Labor MP Andrew Leigh, an former economics professor, floated the idea of bringing back an inheritance a decade ago, he acknowledged the received wisdom is that the idea is political suicide.

The list of developed nations with death duties is long, including the US, UK, Germany, Canada, France, Ireland, Belgium and Italy, adding between 0.6% and 1.4% to the budget bottom line.

The idea also addresses a key issue identified in the Henry tax review – the growth in household wealth for the elderly, which will more than double from 22% in 2003 to 47% in 2030.

Bequests are expected to double as a proportion of GDP over 20 years to 2030, from 2% to 4%, hitting $85 billion at that point.

Costello argues says the Henry review supported inheritance duties as a “fair progressive tax” that could raise 1% of government revenue without affecting productivity.

He points to ATO figures that suggest around 25,000 Australian families hold assets above $10 million. If just 4% of those families paid 35% in estate duties, it would deliver $5 billion in tax.

“Put simply, if built correctly, this tax could unquestionably help finance social needs in the decades to come,” Costello said.

“It is estimated that within the next 50 years there will be 9 million Australians aged 65 or older. There will be more wealth to hand down and fewer of us paying income tax. This is a tax that makes total sense in a country getting older and richer.”

Community Council for Australia CEO David Crosbie said Australia was out of step with the rest of the world and needed to debate the issue.

His organisation argues death duties are a much fairer tax than increasing the GST.

“Inheritance tax in the UK is now at a 35-year high. The so-called ‘death duty’ there raises $7 billion for the government. In Belgium, 1.4% of the country’s overall revenue comes straight from a death tax,” he said.

Tim Costello, brother of Australia’s longest serving treasurer Peter Costello, sees the benefits for his sector.

“It encourages the super rich to give back to the community. We are highlighting that all donations and bequests to charities should be totally exempt from estate duties … so the more you give to charity, the more you help others whilst reducing the tax burden on the estate,” he said.

Follow Business Insider Australia on Facebook, Twitter, and LinkedIn