Australia’s intergenerational wealth gap is widening, fuelled by record-high inheritance transfers and a tax system that favours accumulated wealth over earned income.
With younger Australians struggling under rising living costs and housing unaffordability, some economists argue that an inheritance tax could help restore financial fairness.
This article appeared on The Sydney Morning Herald and discusses the growing role of parental wealth in determining financial security, prompting debate over whether Australia should reintroduce an inheritance tax.
The proposal comes as the largest intergenerational wealth transfer in history unfolds, with Baby Boomers set to pass down $224 billion annually by 2050.
A Shifting Economy Shaped by Inheritance
Australia is witnessing an unprecedented intergenerational asset transfer, with inheritances playing a crucial role in home ownership and financial security.
Research from the Centre for Equitable Housing shows that parental support for first-home buyers has surged from 15% in the 1980s to over 40% today.
The once-optional financial help from family has become a necessity for many young Australians entering the property market.
Meanwhile, national prosperity has grown far faster than wages, deepening the divide between those with access to generational wealth and those without.
Unlike earned income, inherited wealth remains untaxed, reinforcing economic advantages for those born into wealthier families.
A Tax System Favouring Wealth Over Wages
Australia is one of the few OECD countries without an inheritance tax, having abolished it in the late 1970s. In contrast, many other developed nations impose estate taxes to balance economic disparities. The absence of such a policy means that younger workers are often taxed more heavily than investors and wealthy retirees.
Critics argue that this system prioritises accumulated wealth over hard work, exacerbating financial inequality between generations. Thomas Walker, CEO of Think Forward, believes this structure is unsustainable, as financial success is becoming increasingly tied to birthright rather than personal effort.
Growing Support for Inheritance Taxation
Public sentiment on inheritance taxation appears to be shifting. A survey conducted by Think Forward found that 73% of younger Australians support taxing estates valued over $1 million.
Proponents argue that a modest inheritance tax could generate billions in revenue, funding key initiatives such as affordable housing or expanded parental leave policies.
If Australia were to adopt an inheritance tax at the OECD average rate of 15%, it could raise up to $34 billion annually—a significant sum that could be reinvested in future generations.
However, opposition remains strong, particularly among those who believe inheritance is a rightful family asset rather than a taxable economic event.
The political landscape and future considerations
Despite mounting discussions, neither Labor nor the Coalition has proposed concrete reforms on inheritance taxation.
The Prime Minister has acknowledged the issue of intergenerational equity, stating that many young Australians feel they aren’t getting a “fair crack,” but no major party has introduced a policy to address the growing economic divide.
At the same time, private wealth concentration continues to grow, reinforcing financial advantages for those with access to generational wealth.
