Death taxes were abolished in Australia in 1978 but other countries such as the USA, United Kingdom and many European and Asian countries still impose death, estate or inheritance taxes (death taxes).
Did you know if you were born in the USA, your estate may need to pay death taxes in the USA! The laws relating to death taxes are different in each country which imposes a death tax. Your estate may also be caught with paying a death tax if you own assets in a country that imposes a death tax.
Getting back to Australia
Back in 2010, a report on Australia’s future tax system was released and is informally referred to as the ‘Henry Tax Report’. The report was intended to guide tax reforms over a period of 10 to 20 years and included ‘wealth transfer taxes’ (tax on bequests). It is now nearly 9 years since the report was released and while the report did not recommend the introduction of a tax on bequests, it did state that the government should ‘promote further study and community discussion of the options.’ The report then set out suggested parameters for the design features of a tax on bequests – see link.
In 2015 the Turnbull government was being urged to resurrect death duties and Scott Morrison did not rule out the introduction of death duties – see link.
In 2016 a lobby group for Australia’s largest charities said that the government could raise over $5b in new revenue if it re-introduced death taxes – see link.
On 17 October 2018 John Hehir published an article ‘Australia is in trouble: The plan to fix Australia’s tax system’ which is part states:
While the PwC proposal kicks off a discussion over the future of income tax, Australia’s top economists have also said increasing the GST base, death taxes, and a transition to land tax from stamp duty should all be on the table after the last two attempts at serious reform were shelved by Coalition and Labor governments.
On 24 January 2019 The Hon Josh Frydenberg MP (Treasurer) published a media release ‘You don’t say Mr Shorten!’ which again raises the issue of death taxes. The media release makes for interesting reading!
Since the 2010 Henry Tax Report, there certainly has been ‘further study and community discussion’ about death taxes so it seems it is only a matter of time before death taxes are re-introduced in Australia.
What will it mean if death taxes are re-introduced?
If death taxes are re-introduced no doubt most people will have a renewed focus on their succession plan which necessarily will involve tax planning.
Tax planning is already one of our major focuses when we design succession planning strategies. No-one wants an unintended tax event triggered on their death which can happen if for example, some of your beneficiaries live overseas, or you do not include a right to occupy a family home in your Will (see our article Blended family and simple Will – not likely!).
We have extensive experience in dealing with citizens from the USA and the UK and also Australian citizens who own assets outside of Australia, so we already understand the effect of death taxes.
Time to Plan
If you do not have a succession plan (for example: Will, enduring power of attorney, appointment of enduring guardian, superannuation death benefit nominations (see our article Superannuation, most of us have it but what happens with it when you die?), or if you have a family trust and you have not considered the succession of control of that trust), now is the time to meet with us. If you have a current succession plan, it is time to review it and we would be happy to meet with you to review your current arrangements.
If you own assets overseas, were born overseas or any of your children were born overseas or now live overseas, your estate may be liable to pay tax in Australia (CGT) or death taxes in the country where you own your assets.
Now is the time to Plan. Don’t leave it until it is too late! – contact JPM Legal to make an appointment with Eileen Meehan to discuss your unique circumstances.