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Spend the inheritance: Study finds young are 'owed nothing', favour death tax

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Younger Australians were happy if their parents spent the inheritance and would welcome a return of death taxes, the last remaining form of income that does not attract any tax, according to a report from UniSA.

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Death tax was abolished 40 years ago by the Fraser Government, but capital gains tax can still sometimes impact an estate in circumstances such as when a will states that an asset must be sold.

The study found that the people most affected by a return of death tax – the young – would be happy to see its return and they believed that “no one owes anyone anything”.

 Social policy expert, Dr Veronica Coram, from UniSA’s Australian Alliance for Social Enterprise said the apparent decline in the bequest motive presents a significant opportunity for Australian tax reform, and a valuable chance to address social inequalities.

“There’s nothing more certain than death and taxes. But while people generally assume the combination is notoriously unpopular, our research suggests otherwise,” Coram says.

“We talked to young adults and senior Australians and two thirds of them thought Australia should consider reintroducing taxes on estates worth more than $3 million, while only one in 10 were definitely opposed.

 “The lack of interest in giving or receiving inheritances meant that most participants saw no reason to object to estates being taxed, which opens potential opportunities for much-needed tax reform.

 “Inheritances generally go to people who are already well-off and don’t need them; they encourage inequality and inhibit social mobility.

 “The Australian government needs to find ways to raise revenue to support increased spending demands generated by COVID-19, an ageing population, pressure on health systems and increasing environmental disasters.

 “Reintroducing inheritance or estate taxation is a way of increasing government revenue, while reducing a key driver of inequality at the same time.”

 While politicians and policymakers may be wary of making moves,  Coram said the findings reflected changes to social norms in Australia and other OECD countries.

 “Historically, inheritance taxes have been considered ‘political suicide’. But perhaps their time has come, ironically due to a growing individualism and associated decline in the assumption that family members should provide for one another,” Coram said.

 “More research on changing views towards redistributive policy is required, but the results of our study suggest that if governments are considering tax reform, they should not assume that Australians are vehemently opposed to wealth transfer taxation.”

 

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