Deloitte proposes inheritance tax, capital gains cut to help Australia balance the books
Australia’s structural budget problems can no longer be ignored and it’s time we had a long hard think about uncomfortable reform, according to this leading firm.
Australia’s structural budget problems can no longer be ignored, and it’s time we had a long hard think about uncomfortable tax reform.
That is the message Deloitte has delivered to the nation as we navigate a tumultuous economic period.
The firm’s latest Budget Monitor report has made a number of striking recommendations for the nation, including the reintroduction of a policy long considered politically untouchable — a national inheritance tax.
Australia abolished inheritance taxes in the 1970s, and no government has seriously revisited them since. But Deloitte places the idea squarely in its proposed suite of reforms, calling for a broadbased, low-rate inheritance tax.
The rationale is somewhat straightforward. Deloitte argues that Australia’s tax system increasingly burdens wage earners while leaving large pools of wealth comparatively untouched. It is a trend the report says needs to be addressed to ensure fairness and fiscal sustainability.
With major spending pressures rising, the existing tax base is no longer sufficient.
The report shows persistent deficits returning despite solid economic conditions. Deloitte forecasts an underlying cash deficit of around $39 billion in 2025–26, which will likely widen to roughly $45 billion by 2028–29.
The latest lift of about $48 billion in revenue upgrades over four years is minor compared with the $320 billion windfalls delivered earlier in the decade, the report claims.
Meanwhile, the government’s “fast five” spending categories — the NDIS, aged care, health, defence and interest costs — are rising faster than revenue and doing so at a rate Deloitte describes as unsustainable.
Simply put, Deloitte is warning that Australia will require higher taxes over time to fund the commitments it has already made.
The inheritance tax is only one element of a wider package aimed at repairing the budget and improving economic efficiency. Deloitte’s suggested measures also include a raising and broadening the GST.
The report argues that an expanded GST, paired with increased welfare payments, would shift more of the tax burden from income to consumption and broaden the overall base.
It also proposed a uniform 20 per cent company tax rate plus a super-profits tax, which would effectively lowers tax for ordinary businesses while imprinting a separate levy on extraordinary profits.
Another big proposal was to reduce the capital gains tax discount from 50 per cent to 33 per cent to lift taxation on investment income and reduce the disparity between how wages and capital gains are taxed.
Deloitte makes it clear that the era of easy budget repairs, particularly from surging commodity prices, is over and it is now time to think creatively for the future.
Structural forces are pushing spending higher regardless of short-term economic strength, and without reform, deficits will remain entrenched.
The problem is, none of these proposals are politically convenient. An inheritance tax challenges longstanding public expectations, a GST increase has historically been contentious, and changes to investment taxation face strong interest-group resistance.
But Deloitte’s assessment is that avoiding these debates is no longer viable as wealth disparity grows.
With deficits rising and the tax base narrowing, the firm argues Australia now faces a choice between proactive structural reform or continued reliance on temporary solutions that no longer deliver.
Originally published as Deloitte proposes inheritance tax, capital gains cut to help Australia balance the books
