The unexpected benefit of slugging the rich

AS DEBATE moves away from the GST, other options to raise money are being explored, and some could have interesting impacts.

A pile of Australian banknotes

AS DEBATE moves away from the GST, other options are being explored to raise money, and some could have interesting impacts.

Today, the non-profit sector has called on federal Treasurer Scott Morrison to introduce a death tax, saying it could raise billions in new revenue as well as increase charitable donations.

A death tax would only be applied to estates over a certain value.

Community Council for Australia (CCA) chairman Tim Costello said it would be the fairest way to address budget repair.

The tax is estimated to raise more than $5 billion if applied to estates with a net wealth over $5 million.

Death taxes, inheritance taxes or estate levies already apply in most OECD countries, with Japan taxing at 55 per cent, the UK and the US at 40 per cent and France at 45 per cent.

In the UK, death duties raise $7 billion for the government.

But one interesting side-effect could be an increase in charitable donations.

Mr Costello said a death tax would encourage the super rich to give back to the community if donations were exempt from the tax.

“We are highlighting that all donations and bequests to charities should be totally exempt from estate duties,” he said.

“So the more you give to charity, the more you help others whilst reducing the tax burden on the estate.”

Australia had inheritance taxes until 1978, when Queensland premier Joh Bjelke-Petersen abolished that state’s levies and other states followed suit.

CCA chief executive David Crosbie said there were around 25,000 “super rich” Australian families and so the new tax would impact only a small percentage of the population and be fairer than an increase in the GST.

A tax of 35 to 40 per cent on estates with a net wealth of more than $5 million could raise around $5 billion in revenue.

Reducing the applicable rate in return for donations to charities would also encourage at least $100 million in additional bequests, he said.

Mr Crosbie said a new tax would have to be indexed to ensure it did not slip down over time to hit average income earners, and care would have to be taken to ensure compliance.

Mr Costello urged Mr Morrison to consider the idea.

“If built correctly, this tax could unquestionably help finance social needs in the decades to come,” he said.

CCA’s members include Lifeline Australia, Beyondblue, Mission Australia, The Smith Family and World Vision Australia.

Originally published as The unexpected benefit of slugging the rich