Australia is one of the few OECD nations without an inheritance tax, a distinction that has fueled debates over economic fairness and wealth inequality. While these taxes were abolished in the late 1990s, a growing number of economists and advocacy groups argue that reinstating them could help make the tax system more equitable.
A recent report from Anglicare Australia highlights how the absence of an inheritance tax has accelerated inequality, allowing wealth to concentrate among a shrinking percentage of the population. The organization is calling for a tax on large inheritances above $2 million, excluding the family home, to avoid burdening middle-class households.
The Shifting Tax Burden
Australia’s tax system has evolved over the years, placing more pressure on working Australians while allowing wealth-based taxes to remain relatively low. Taxes on capital gains and land ownership contribute far less to government revenue than personal income tax, in part due to generous concessions.
Without inheritance taxes, large estates can be passed down virtually tax-free, reinforcing generational wealth gaps and making it harder for those without inherited assets to achieve financial security. Anglicare executive director Kasy Chambers argues that this system disproportionately benefits the wealthy while increasing inequality for the broader population.
Why Inheritance Taxes Are Politically Sensitive
Despite the economic case for inheritance taxes, they have remained politically unpopular. The idea has been repeatedly dismissed due to strong public opposition and scare campaigns linking them to so-called “death taxes.”
Former Treasury secretary Ken Henry acknowledged in his landmark 2009 tax review that a bequest tax could be an efficient way to raise revenue while reducing the need for less effective taxes. However, he stopped short of recommending its introduction, citing the controversial history of inheritance taxation in Australia.
The Role of Public Perception
Public perception plays a major role in tax policy debates, and inheritance tax proposals are often framed as an attack on average Australians, despite their focus on high-value estates.
According to Australia Institute chief economist Greg Jericho, these concerns mirror the backlash against superannuation tax reforms, which were designed to impact only the wealthiest account holders but were widely misinterpreted as broad tax increases.
“The challenge with these types of tax reforms,” Jericho explains, “is that they are easily manipulated into fear campaigns, despite the fact that they would benefit most Australians by reducing inequality.”
While some experts argue that an inheritance tax could improve economic fairness, its political viability remains uncertain. Governments have been reluctant to revisit the issue, knowing that any attempt to reinstate the tax would likely face intense opposition.
