Known under various names including ‘estate tax’, ‘bequest tax’ or ‘death duty’, these taxes operate either directly by taxing a person’s estate or indirectly through taxing beneficiaries of the estate. Succession taxes exist in many countries including Germany, the United Kingdom, Japan and the United States.
While the duty is socially unpopular, there is an undeniable economic appeal to such a tax. As we see each budget period, the demand for services from State Governments' increases while revenue sources are more constrained. Arguably, taxing a person’s savings when they are no longer able to utilise them is a less costly and more economically efficient alternative.
The benefits of a succession duty were recognised by the Henry Review, but it opted for the diplomatic recommendation that ‘Given the controversial history of bequest taxation in Australia... the Review believes there should be full community discussion on the options’.
Time for the discussion.