Death tax would save budget billions: Costello
Thursday, 11 February 2016 12:34pm

The pre-budget cloud of ideas continues to thicken with Community Council for Australia chair Tim Costello advocating the federal government create an estate duty or death tax.

Costello and the Council believe such a tax would generate more than $5 billion in revenue for the government and see about $100 million go towards charities.

The Council said Australian Taxation Office (ATO) figures suggest about 25,000 Australian families hold assets above $10 million. If 4% of those families paid 35% in estate duties, it will equate to about $5 billion.

"If built correctly, this tax could unquestionably help finance social needs in the decades to come.  We urge the Federal Treasurer to look at this idea.  It is an income option that cannot be ignored. There has never been a stronger case for an inheritance tax," Costello said.

"It is estimated that within the next 50 years there will be nine 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 chief executive David Crosbie said 0.3% of the nation had wealth of more than $10 million and estate duties would only impact a small number of rich Australians.

He added the idea was supported in the Henry Review which said over the next 20 years the proportion of all household wealth held by older Australians is projected to increase substantially, and large asset accumulations will then be passed on to a relatively small number of recipients.

The Council also said the Henry Review showed inheritance duties would be a fair progressive tax that could raise 1% of government revenue with no negative impacts on productivity.

Costello said these kinds of taxes have been used for years by many countries including the UK, Germany, Italy, France, Belgium, Canada, the Republic of Ireland and some states in the US. Australia did abolish death duties in 1979 but there are now calls to reintroduce similar taxes.

Crosbie said: "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."

The Council believes death or inheritance taxes or estate duties are a fairer tax hit than an increase in the GST.

"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 the more you give to charity, the more you help others whilst reducing the tax burden on the estate," Costello said.

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