A major Australian think tank has proposed a new inheritance tax targeting the wealthiest citizens. The measure is part of a wider strategy to boost government revenue without burdening low and middle-income earners.
A potential reintroduction of inheritance tax has sparked public debate across Australia. The idea, floated by The Australia Institute, forms part of a broader fiscal package aimed at redistributing wealth and funding key public services.
The proposal follows a projected intergenerational wealth transfer estimated at $3.5 trillion, as Baby Boomers and the Silent Generation pass on their assets. As such, policymakers face growing pressure to address economic inequality and strengthen the country’s revenue base.
Think Tank Outlines Inheritance Tax Targeting Top 5% of Estates
The Australia Institute estimates that reintroducing an inheritance tax could generate approximately AUD 10 billion annually. The policy would apply only to the wealthiest 5% of Australians—those receiving inheritances ranging from AUD 5 million to AUD 10 million or more, according to the Institute’s senior economist Matt Grudnoff.
Australia previously imposed inheritance taxes—known as “death duties”—until they were phased out by federal and state governments in the late 1970s and early 1980s. Since then, the country has relied on Capital Gains Tax (CGT), which applies only to appreciated assets transferred after death or as a gift. Critics argue that CGT has proven insufficient in capturing large wealth transfers.
Grudnoff said the tax would apply to both inherited and gifted assets, addressing a growing trend among older Australians who provide early financial support to younger generations. “Australia is really bad at taxing wealth. We tax it really lightly, and that has consequences.”
International comparisons show that many OECD countries, including Belgium, Italy, Brazil, Turkey, and the United States, apply some form of inheritance tax. These typically include tax-free thresholds, with rising rates based on the size of the inheritance or the beneficiary’s relationship to the deceased.
Broader Reform Package Aims to Raise Aud 70 Billion per Year
The inheritance tax proposal is one of three key revenue measures outlined by the think tank. The second is a 2% annual wealth tax on individuals holding net assets above AUD 5 million, excluding their primary residence and superannuation. This measure is projected to raise AUD 41 billion annually.
The third recommendation involves eliminating the CGT discount, which currently allows individuals to reduce taxable capital gains by 50% if they have held the asset for at least a year. According to Grudnoff, taxing capital gains at full marginal rates—similar to employment income—could generate AUD 19 billion per year.
Combined, the proposed policies could raise up to AUD 70 billion annually, funds that the Institute says could be directed toward strengthening education, healthcare, housing, and welfare systems.
The proposals are expected to feature prominently during the government’s upcoming economic roundtable, where long-term strategies to improve fiscal sustainability will be discussed.
