In 2025, the conversation is heating up around a major economic shift: Australia is considering reviving its inheritance tax, a move that could fundamentally change how wealth is passed down—and taxed. If adopted, this proposal could raise a whopping A$70 billion annually, with most of that burden falling squarely on the shoulders of Australia’s wealthiest families.
Whether you’re a tax professional, property owner, investor, or just someone trying to wrap your head around estate planning, this article breaks it down in simple terms with real-life insights and practical guidance. Let’s dive into what’s proposed, who’s affected, and how you can stay ahead of the game.
Australia Considers Reviving Inheritance Tax
| Feature | Details |
|---|---|
| Proposal Origin | The Australia Institute |
| Estimated Revenue | A$70 billion per year |
| Wealth Tax | 2% annually on net assets above A$5M (excludes home/super) |
| Inheritance Tax | Tax on large estates; proposed A$10B/year in revenue |
| Capital Gains Tax (CGT) Reform | Ending CGT discount; adds A$19B/year |
| Government Stance | No formal legislation; ruled out “for now” by Treasurer |
| Global Context | Similar taxes exist in U.S., U.K., Japan |
| Official Website | australiainstitute.org.au |
Whether or not this proposal becomes law, the debate signals a clear shift: governments worldwide are targeting wealth inequality through taxation. For high-net-worth individuals, the writing’s on the wall—review your financial plans, estate strategies, and tax exposure now.
This isn’t just a political ping-pong match. It’s a serious conversation about the future of wealth, fairness, and opportunity in Australia. If you’re sitting on significant assets, or advising those who are, now’s the time to act—not react.
A Little Throwback: When Inheritance Tax Was Real in Australia
Back in the day—pre-1979, to be exact—Australia had death duties. These were state-level taxes applied to deceased estates. But by the late 70s, every state had abolished them.
Why? Well, people were moving their money across states to dodge the tax, which led to a race-to-the-bottom repeal. Without a federal framework, the tax became unworkable. But now, with income inequality a growing concern, it’s back on the table.
Fun Fact: Australia is one of the only OECD countries without an inheritance tax today.
Breaking Down the A$70 Billion Proposal
Let’s take a closer look at the three main ideas in the Australia Institute’s proposal and how they could reshape the economy.
1. The Wealth Tax
- Who’s targeted: Individuals with net assets over A$5 million (excluding family home and super).
- How much: A 2% annual tax.
- Revenue goal: Estimated A$41 billion per year.
This targets Australia’s wealthiest 1%, particularly those with real estate, business shares, and large portfolios.
Example:
If Jane owns A$8 million in assets (excluding her home and super), she’d pay 2% of A$3 million = A$60,000 annually.
2. Inheritance Tax (Death Duty Revival)
- Who’s targeted: Large estates, possibly those valued over A$2M–A$5M.
- How it works: Tax is paid by the estate before distribution to heirs.
- Revenue goal: A$10 billion per year.
This could include a gift tax rule to stop people from dodging taxes by giving assets away early.
Hypothetical:
If Bob passes away leaving A$7 million, and the threshold is A$5 million, his estate may pay 10–20% on the A$2 million overage = A$200,000 to A$400,000.
3. Scrapping the CGT Discount
Currently, Australia offers a 50% capital gains tax discount on assets held longer than a year. This proposal eliminates that perk.
- Who’s affected: Property investors, retirees, high-frequency traders.
- Revenue goal: A$19 billion annually.
Current Tax Rules vs. Proposed Inheritance Tax
| Feature | Current Australian Rules (Post-1979) | Proposed Inheritance Tax |
| Tax on Inheritance | No direct tax on the transfer of wealth | A direct tax on inherited assets over a high threshold (e.g., $5 million) |
| Who Pays the Tax? | The beneficiary may pay tax on income or capital gains from inherited assets (e.g., rent, dividends, or selling a property) | The beneficiary would pay a direct tax on the value of the inheritance itself |
| The Family Home | Generally exempt from Capital Gains Tax (CGT) if sold within two years of inheritance | The primary residence would likely be exempt, protecting smaller, family estates |
| Primary Goal | Tax income and gains generated from the assets after they are received | Raise significant revenue and address wealth inequality |
How Does Australia Compare Globally?
| Country | Inheritance Tax Rate | Exemption Threshold |
|---|---|---|
| U.K. | 40% | £325,000 (≈A$630,000) |
| U.S. | 40% (federal) | $13.6 million (≈A$21M) |
| Japan | Up to 55% | ¥30M (≈A$300,000) |
| Australia | None (currently) | N/A |
Australia’s potential re-entry into inheritance taxation would bring it in line with other developed nations—many of which already tax estate transfers.
Expert Insight: What the Pros Are Saying
“This is not about punishing success; it’s about fair taxation of unearned wealth. Inheritance is the most unearned income of all,” said Dr. Richard Denniss, Chief Economist at The Australia Institute.
“Wealth taxes sound good politically, but in practice, they are hard to enforce and easy to avoid,” warns Adrian Raftery, tax lecturer and author.
Quick Guide: Do’s and Don’ts of Estate Planning Now
Do:
- Review your will and asset structure.
- Explore trusts and foundations.
- Talk to a licensed estate planner or accountant.
Don’t:
- Assume these proposals won’t affect you.
- Rely on outdated asset protection strategies.
- Delay planning until legislation is passed.
Myths About the Proposed Inheritance Tax
MYTH: “I won’t be able to leave my kids anything!”
FACT: The proposal targets only the wealthiest estates, with a proposed threshold that would exempt the vast majority of Australian families.
MYTH: “The family home will be taxed.”
FACT: Most proposals include an exemption for the primary family home to protect the average Australian.
MYTH: “This is a brand-new tax concept.”
FACT: Australia had inheritance taxes until the late 1970s, and most developed countries today have a form of inheritance or estate tax.
Real-World Impact: What If This Becomes Law?
Imagine a family with:
- A $3M investment property
- $1.5M in shares
- $1.5M in business assets
They’d exceed the A$5M wealth tax threshold, be subject to CGT rule changes, and face inheritance taxes when the property passes to kids.
Bottom line: The richer you are, the more proactive you need to be.
Bonus Resource: Use a Tax Impact Calculator
Curious how this might impact your portfolio? While official government tools aren’t out yet, try third-party CGT calculators or estate tax simulations on trusted sites like:
- ATO Capital Gains Tool
- Mozo’s Investment Calculators
FAQs
Q: Is inheritance tax legal right now in Australia?
A: No. It’s just a proposal from a think tank—not law (yet).
Q: Will this tax my family home?
A: No. The family home is explicitly excluded from the wealth tax.
Q: Are superannuation funds taxed under this?
A: No. Super balances are also excluded from the proposed wealth tax base.
Q: Can I avoid inheritance tax with gifts?
A: Maybe not. A gift tax is part of the proposed plan to close loopholes.
Q: Will this affect middle-class Australians?
A: No. The proposal targets only the wealthiest 5–10% of Australians.
