went viral during the 2019 election<\/a>, with an onslaught of social media misinformation claiming wrongly that Labor had plans for an inheritance or estate duty.<\/p>\nThe opposition leader, Angus Taylor, has defended people using such trusts for \u201chonest reasons\u201d, claiming the changes were a \u201cdeath tax by stealth\u201d.<\/p>\n
That\u2019s plain wrong, according to several tax experts.<\/p>\n
\u201cThe federal budget changes do not levy a tax directly on the capital value of inherited assets,\u201d says Tony Martins, principal supervisor at UNSW\u2019s tax and business advisory clinic. He adds the budget also does not propose any upfront tax on the total value of an estate when a person dies.<\/p>\n
Stephen Bartos, a professor of economics at the University of Canberra, is equally definitive.<\/p>\n
\u201cThere\u2019s no death tax being introduced in the budget, that is a complete furphy,\u201d Bartos says.<\/p>\n
\u201cThe only reason to set up a discretionary trust is to allocate moneys to people who aren\u2019t earning anything as a way to minimise tax. The changes don\u2019t apply to existing trusts, so if you\u2019re worried, just don\u2019t set one up.\u201d<\/p>\n
\u201cThese changes apply to only a very, very small number of people who employ very vocal accountants who are mounting this campaign.\u201d<\/p>\n
Chalmers has said if people want their testamentary trust to avoid the 30% minimum tax, they can still set up a fixed trust, where the distribution of the assets and income from those assets are fixed in the will.<\/p>\n
What the budget does propose, says Martins, is changing how income and capital gains generated by some of these inherited assets are taxed, starting from July 2028.<\/p>\n
\u201cBecause this minimum tax removes the longstanding advantage of distributing trust income at a beneficiary\u2019s lower personal tax rate, families will pay significantly more tax on the earnings their inheritance generates,\u201d he says.<\/p>\n
Lisa Greig, a tax lecturer at the University of Melbourne, agrees the proposed minimum tax rate on testamentary discretionary trusts is \u201cnot a death tax as such\u201d. But it will increase how much tax is paid on wealth moving between generations, assuming people stick with these trusts and don\u2019t change their tax affairs.<\/p>\n
\u201cThat\u2019s where it\u2019s a death tax by stealth,\u201d Greig says.<\/p>\n
The respected independent economist Saul Eslake also rubbished claims this constituted a \u201cdeath tax\u201d.<\/p>\n
\u201cNo, I don\u2019t believe this is a death tax.\u201d<\/p>\n
3. Even if this isn\u2019t a death tax, would that actually be a good idea?<\/p>\n
That\u2019s an even more contentious argument in Australian politics \u2013 but Eslake reckons it shouldn\u2019t be, and that this fight \u201copens the door to a debate we ought to be having\u201d.<\/p>\n
\u201cWe are an outlier among advanced economies in having no form of inheritance tax. Only 12 of 36 OECD members have no form of tax on estates or inheritances,\u201d he says, noting the UK and the US had estate or inheritance taxes on large inheritances.<\/p>\n
Eslake said in the next two decades, an estimated $5.5tn in wealth will transfer from ageing baby boomers to their descendants, and that Australia\u2019s ageing population would put even greater strain on health and aged care systems.<\/p>\n
\u201cWhy shouldn\u2019t some of that $5.5tn be used to help to pay for their aged care?\u201d he ventured, suggesting Australia could look at a 30% tax \u2013 which should be indexed \u2013 on estates above $8m or on inheritances over $1m.<\/p>\n
\u201cSomehow, in Australia, to suggest we should have an inheritance tax \u2013 it paints you as a raving communist.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"1. What is actually in the budget about trusts? The budget proposes a 30% minimum tax on trusts,…\n","protected":false},"author":2,"featured_media":688172,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[64,63,44],"class_list":["post-688171","post","type-post","status-publish","format-standard","has-post-thumbnail","category-australia","tag-au","tag-australia","tag-news"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/688171","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=688171"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/688171\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/688172"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=688171"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=688171"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=688171"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}