Urgent call for reform: Economists urge a new approach to inheritance tax
Australia faces structural budget pressures that can no longer be ignored. It’s time to confront uncomfortable tax reform and rethink the income-to-spending balance that shapes the nation’s finances.
That message comes from Deloitte, which lays out a candid view in its latest Budget Monitor. The report presents a series of bold recommendations, including reviving a policy that most governments have avoided for decades: a national inheritance tax.
Australia did away with inheritance taxes in the 1970s, and since then there has been little serious consideration of reintroducing them. Deloitte argues for a broad-based, low-rate inheritance tax as part of a broader reform package aimed at improving fairness and ensuring long-term fiscal health.
Why this proposal? Deloitte contends that Australia’s tax system increasingly fallsbalance toward taxing wages while leaving substantial amounts of wealth less taxed. This skew, the report suggests, undermines fairness and sustainability as public spending pressures grow.
Even in a context of solid economic performance, deficits persist. Deloitte’s projections show an underlying cash deficit around $39 billion for 2025–26, expanding to roughly $45 billion by 2028–29. Revenue gains of about $48 billion over four years are modest when contrasted with the roughly $320 billion windfalls seen earlier in the decade.
Deloitte highlights that five major spending areas — the National Disability Insurance Scheme (NDIS), aged care, health, defence, and interest costs — are rising faster than revenue, a trajectory the firm calls unsustainable.
In plain terms, the report warns that higher taxes will be needed to fund the commitments already made, unless new reforms are implemented.
The inheritance tax is not offered in isolation. It is part of a broader package designed to repair the budget and improve economic efficiency. Other suggested measures include broadening and increasing the Goods and Services Tax (GST).
An expanded GST, coupled with higher welfare payments, would shift more of the tax burden from income to consumption, widening the tax base. Additional ideas include a uniform 20% corporate tax rate complemented by a super-profits tax, which would reduce the burden on ordinary businesses while applying a separate levy to unusually large profits.
Another significant proposal is trimming the capital gains tax discount from 50% to 33%, aiming to raise taxation on investment income and narrow the gap between how wages and capital gains are taxed.
Deloitte emphasizes that the era of easy budget fixes—driven by commodity booms and favorable cycles—has ended. The future requires imaginative, structural thinking.
Structural forces are pushing spending upwards regardless of short-term economic health, and without reform, deficits risk becoming entrenched.
Yet none of these reforms are politically easy. An inheritance tax challenges long-held public expectations, GST increases have historically sparked opposition, and changes to investment taxation draw strong lobbying resistance.
Nevertheless, Deloitte argues that dodging these debates is no longer viable as wealth inequality grows. With deficits widening and the tax base narrowing, Australia faces a choice: act now with structural reforms or rely on temporary fixes that no longer deliver.
Would you support reintroducing an inheritance tax as part of a broader reform package? How should Australia balance fairness, growth, and political feasibility in tax policy? Share your thoughts in the comments.
