Australia’s run of over 40 years without an inheritance tax is in danger of coming to an end, according to Jonathan Hoyle, which would bring it in line with most other developed nations.
The Stanford Brown chief executive believes the country’s policy of having no inheritance outside superannuation is “quite unusual”, and likely to be amended.
“We quite expect that to change,” Hoyle said at a recent media event in Sydney. “I think it’s an unsustainable position.”
Hoyle explained that the tremendous amount of wealth due to change hands between generations over the next ten to twenty years – estimated at around $3 trillion – will eventually force policy-makers to make an unpopular decision.
“It’s bound to happen because growth rates are too low to support it, and there’s so much inter-generational transfer of wealth now,” he said. “We are going to see higher estate taxes, no question.”
Hoyle pointed to the UK and the US, where inheritance tax is a “very punitive” 40 per cent.
Australia is one of only 15 OECD countries that levy no tax to their lineal heirs. Japan has the highest estate taxes in the world at 55 per cent according to The Tax Foundation, with South Korea (50 per cent) and France (45 per cent) also edging out the UK and US.
The average inheritance tax among the 36 member countries in the Organisation for Economic Co-operation and Development is fifteen per cent.
In 1978 Australia became the first developed country in the world to get rid of existing inheritance tax, a move which was followed by several other wealthy nations.
Hoyle said the spectre of an Australian inheritance tax plays a part in Stanford Brown’s advice discussions.
“Our job is to be conservative when we’re planning for our clients,” Hoyle said. “One of the things that we talk about is that tax rates are probably going higher and there may be an inheritance tax,”