Hasn’t the appropriate amount of income tax already be paid by the person who saved the inheritance?

The way Australians spend before they retire, and their assumptions that they will be able to live as well, if not better, in their retirement than they did while they were working, makes those ‘intentions’ to leave money behind for their families a huge joke. These poor, naïve and economically challenged people are still ignoring the warnings that they will not have enough money to live the lifestyles they plan, let alone leave anything except bills and reverse mortgages behind them for the survivors.

Most people simply do not have enough super, and they will need a part pension, at least, to make ends meet. It’s all talk, folks.

Inheritance tax is a disgusting idea, hitting only those who have taken the trouble to plan financially; 80% of the people will not have enough to tax, as anyone who takes note of the way people throw around money they don’t actually have, as politicians do the same thing and tell the fools how good the economy is.

Of course there is “…a widespread distaste of unearned income or wealth windfalls...” – by people who hate anyone with forebears with the skills to accumulate money to leave behind; the ones who are already bludging off money belonging to other people, doled out to them by socialist politicians who stay in power because of their largesse with other peoples’ money.

People who look to punish the rich – or just people careful with their money – would be no better off, because they (the freeloaders, socialists and other no-hopers) would blow in a few weeks it what took others a lifetime to accumulate.

Hi Julie,

When you speak of “inheritance”, “wealthy households” and “estates” I immediately see these as emotive words. I also see much of the rhetoric surrounding many of these debates as rude, trivialization of achievements and a threat.

Allow me to explain. Our first house was a tip in the outer suburbs, we had some “hand me down furniture” but in our free time we did the place up and sold it. We did this about twelve times in 40 years. After finishing uni. I worked in corporate, in the early days for much less than some of my mates were earning “making things”. Whilst working I also did three diploma courses and another degree.

I regularly worked 70 hours a week, was either interstate or overseas for about 100 days a year, we made some sacrifices for the kids’ education, paid most of our income tax at a marginal rate of 48c in the dollar, got no tax breaks, paid for our own super, paid for private health care and now own our home.

We are not state dependent in any way and anything we have is fully tax paid.

So when I say “rude”, I mean that whatever we decide to do with anything we own must be our decision, it is absolutely nothing to do with anyone else. When I say “trivialization” I mean we worked damn hard for whatever we have and were not given anything. And when I say “threat” I mean that there are those who see what we have as ideologically bad and want a slice of our action.

We all have the same chances, we have to take them and work for them. If we chose to give our kids and grandkids a leg up, that should be our choice.

On the other hand there are lots of little green, socialist envy monsters out there who want more of other peoples money to go into the trough that their state dependency snouts are buried in.

One of the problems with surveys by financial orgs is that they are self serving. Some kids, by the time they turn 50 or so with the extended longevity of their parents, might get $500K, but most won't.

According to Melbourne Institute’s Household, Income and Labour Dynamics in Australia (HILDA) Survey, the mean inheritance peaked at $109,285 in 2006 was, up from $50,861 in 2002. That's before the GFC. Consider the Boomers will chew through about 3-4 per cent of out GDP until about 2050.

I wouldn't be lowering taxes just yet.

Grumbler
It is by no means likely that the person leaving the inheritance has paid the 'appropriate' amount of income tax. Take negative gearing, for example, which is only available to those with some disposable income to get a foot on this lucrative ladder: they can reduce their income tax by claiming against their investment mortgages. The loss of tax revenue is made up by other taxpayers and they get to accumulate a property portfolio. People with a lot of wealth can afford top financial advice and arrange their affairs to pay very little tax. I have no problem with people having buckets of money, but I do object to their ability to avoid paying tax under our current system.

We need a complete overhaul of the tax system rather than just tacking on an inheritance tax. The Henry report provided a blueprint for tax reform, but none of our politicians have the guts to implement it.

Candide,
Let's push for a flat tax. No negative gearing no nothing, the same for everyone.

What is it about "negative gearing" that so upsets some people? It is exactly the same as borrowing money to start, or finance any business.

If I borrow to set up a restaurant, buy a taxi or build a shopping center, the interest on my borrowings is tax deductible. If I were a tradesman, with good earnings, I would want to set up another form of business, before I became too old to handle the physical work involved.

Why should I not establish rental housing, rather than build a shopping center?

Without people using cash flow from other areas to subsidise their acquisition of rental housing, rents would have to rise dramatically.

I would never go into rental housing, it has too many problems for me, but I have never understood the extreme dislike of many for it as a legitimate business.

Is there any good argument against confiscating the estates of deceased baby boomers to pay for the mistakes their generation has made?
See it's my kids, now aged 15 and 11 who are going to have to pay for their grandparents largesse and incompetence, they're going to be growing up under "austerity measures", they're going to be unfairly taxed to provide lifetime social security benefits for millions of third world migrants and dumb White people who neglect their own personal responsibilities.
Even if we reversed all the changes our parents made it's still going to be a grim and relentless struggle for our kids because we are not going to be able to help them at all, I'll be working until I'm at least 75 just to stay afloat.

Candide,

If you believe there are $$windfalls to be made from rental property what is preventing you from getting a bit of the action?

I have been to meetings of (residential) property owners. I must tell you that for people who are supposedly wealthy as you obviously believe, they sure dress as though they buy at St Vinnies, and the cars outside were older versions of very common, cheap cars. All had heaps of troubles to discuss too, which explained their haunted looks.

Government can't manage public housing. It was always too complex, too expensive and damned unrewarding in every way. So government has unceremoniously shoved its welfare recipients onto the private owners. Tenancy regulations are drafted to protect the most incompetent and wilful tenants and rental authorities and tribunals know how to protect their large and growing hierarchies.

Anyhow, the mums and dads who provide the lion's share of rental housing would be lucky to be earning a few percent gross for their sacrifice, worries and loss of their own quality of life.

Candice, you and others like you should be worried that these mums and dads investors do not realise how futile their property 'investing' really is, forever sacrificing and laboring themselves in the hope of a pay-off one day, but taxed once again of course.

From the facts, not the blurb of the white shoe brigade and envious superficial assessment from people such as yourself, these property investors live on a razor edge and it would be easy for them to collapse financially from a myriad of serious events. Murphy's Law, with a lot of help from 'those' tenants (who are in an abundance).

As well, it would be easy for the ham-fisted actions of government to provoke a lasting run against investment in rentals. Then again, you might think that a downhill run is a good thing too. But once again, you don't consider the negative consequences.

I wouldn't advise any family member to invest in rental property. You should 'invest' in it though for the learning experience.

Hasbeen,
I'm fully aware that negative gearing is as entrenched in our psyche as the unions right to ask for evermore pay ncreases. Just think what would happen if we did away with both ? Just think if either we make negative gearing available for all not just business or leave things as they have been for a long time & the negative effects of which are now starting to hit home.
I think negative gearing is one of the main factors for our everything going down the tube.
Just imagine simple reward for effort/risk, how gratifying that would be instead of what we have now. No wonder those in big business can't help making more money even if they didn't want to. Don't blame the businessman, blame the system. Flat tax, even playing field, no blame,, simple !

Dear Jay of Melbourne,

I was deeply saddened by the plight of your children aged 15 and 11 who will have to pay for their “grandparents largess and incompetence”. I also note you have changed the theme of this thread from “giving to the next generation” to “confiscating from the baby boomers”.

I thought it worth a mention that it was the baby boomers who by 2007, had put $22bn in the bank, accrued $70bn in the future fund and paid off the previous ALP governments $94bn debt on the nations credit card.

Since 2007, the APL had spent all the $22bn in the bank, burnt a hole in the future fund and racked up a colossal $350bn and growing national debt. I doubt this had much to do with your grandparents but I’d be interested in their comments should you dare to raise the matter of “confiscating” their hard earned cash.

There are always two sides to a story, so the other side of your children’s predicament is that you as parents have failed to provide financial security for your children, are insufficiently qualified to get employment that provides for them or their future, can’t get the previous generations to give you their hard earned money and as parents, you are doomed to work until the age of 75? All because you are a financial failure and wish take money from others or blame them anyway.

It is long past time you found a way to be a success in the eyes of your children and to stop blaming your grandparents and the rest of Australia for your personal financial failures.

It is also time you broke the parasitic relationship you have with the rest of Australia.

Educated or not, I can relate to any employers reluctance to hire you. Get a life of your own and man up to your responsibilities instead of whining and blaming others for being the pitiful specimen you are.

Jay Of Melbourne for gods sake stop whinging. Just what do you think the baby boomers got that your kids haven't got.

I started school in Townsville in 1946. In a class of 40 there would not have been 5 kids with shoes. Kids depending on legacy, with no fathers, or those lucky ones whose fathers had just got back from the war could not afford shoes.

My father came out of the air force in 1946 with a civilian suit, 57 pounds & a train ticket home. He was 36 years old, with a wife & a child, & sweet Fanny Adams to show for it.

Kids like me had pillowslips made from flour bags. Some because the family could not afford anything else, or because there were no pillowslips to buy, & no material to make them with.

Perhaps you should count your blessings old chap.

If you don't want useless immigrants here, & I agree fully with that, let it be known loud & clear that you will; not vote for any party that doesn't promise to stop them completely. Encourage others to do the same.

politicians will promise anything to get elected, all you have to do then, is make sure they are Abbott type promises, not the Gillard type.

Just don't expect me to provide for your grandkids. I'll look after mine, you look after your own.

Great article Julie, in fact, I started one recenty on the same topic but was jumped upon.

Nothing unusual as this site harbors many under achievers.

.....We all have the same chances, we have to take them and work for them. If we chose to give our kids and grandkids a leg up, that should be our choice.

Sorry spindoc but I disagree, because if you are born lucky you have a chance very few poor people get.

I personally know at least three families who will leave in excess of 100$ million and which ever way you look at it, nobody deserves to be gifted that amount.

I suggested that the tax should cut in at $500,000 per sibling, with capital gains style tax to be paid on any excess.

The tax should apply to DIRECT FAMILY members only and if the donor wishes to gift outsiders, the math is simple.

Inheritance, divvied by the numbe of direct family, less the pre tax amount, then the balance is taxed prior to distribution.

Family farms, businesses are exempt unless they are either sold or borrowed against.

At the end of the day we are broke and need to find some way to fund others retirement, BUT!, every cent from this tax MUST NOT go into consolidated revenue, as it must be reserved fir funding retirees.

Hasbeen, if you take away negative gearing, you put rents through the roof.

I am astounded at the lack of realism displayed by most posters on this subject, who seem unable to face up to the facts of life.

The first point is almost all people with large assets do not want them to go to the government when they die.

The second point is that any form of taxation of inheritances will only affect the middle class. The cost of arranging your assets so that they pass tax-free to your heirs is pretty much the same no matter what assets you have; the rich can easily afford to do this, whereas the middle class will find that the cost is comparable to or greater than the tax that would have to be paid.

The third point is that there seems to be no limit to the legal lengths people will go to be able to pass on their estate. I can remember, decades ago, watching an elderly man doubled over with stomach cancer, painfully climbing the steps of a major rural newspaper to lodge an advertisement. The newspaper normally would not accept such an ad, but they accepted his. The ad stated that the man's son was a lying, thieving cheat, and that no-one should have any business dealings with him. The son sued for libel. The local jury knew what to do. They assessed damages at the value of the elderly man's considerable estate, which was transferred by court order, and the government didn't even get to collect any stamp duty.

The last point is that because of the above points, no politician desirous of re-election would ever support any such tax.

plerdsus, let me ask you a question.

Do you think an inheritance of say $500,000 per sibling before being taxed is unreasonable?

Do you also think that just because of the luck in birth, that a fourth generation person, should enjoy living in a twenty million dollar mansion, perched on a cliff face overlooking Sydney Harbour, which allows some thirty year olds the privilege of never working again and having all the toys in the world simply because dad, his dads dad and his dad worked their butts off? Or mum of cause.

Sure, live there if you wish, but not if you are going to borrow against the asset to fund an il deserved life of luxury.

This is why I say the tax should cut in at say half a million.

As for the rich avoiding the tax, this could be stopped by planning of laws.

One such law is for the government to place an easement in front of the property or a caviet when the owner passes and the only way to remove that if borrowing against the assett, or selling, would be to pay the tax.

Hasbeen, if you take away negative gearing, you put rents through the roof.
rechtub,
we haven't had anything like a tax reform & rents are already through the roof. I think with a level Tax playing field those with the go & know-how in them will prove otherwise. The only reason why everything is against Australia's economic futur is the fact that we have the system we have. My problem with negative gearing is that it fosters the Harvey Norman mentality of buy now & let others pay later. Let's face reality here, when people are given the opportunity to go head over heels into debt they will do so & the endresult is that when they default everyone else has to fork out. Does anyone actually "own" anything now ? What can one "own" without having to keep paying for continued ownership long after the goods have been bought.

Hi rehctub,

The politics of envy don’t get any prettier. I can’t believe that in Australia we have people who wish to legislate to grab the assets of fellow Australians for themselves.

How about legislating to take possession of assets belonging to those who go to a Christian school, eat pork, drive foreign cars, don’t have an ethnic background, chew tobacco, shop at Aldi, eat white bread and drink French wine?

This is not about where you are starting from, it’s about where this stops.

Fascinating, rehctub.

Your underlying premise appears to be that nobody should be allowed to get rich, whatever they do. Using death as an excuse to take away someone's wealth is merely a convenient smokescreen - fundamentally, you disapprove of any form of wealth accumulation, don't you.

>>Do you think an inheritance of say $500,000 per sibling before being taxed is unreasonable?<<

Well of course it is unreasonable.

It is most likely that the "wealth" cannot be simply divided, but instead requires the dismantling of a business, or the division of land, or the sale of property. This is pure destruction-by-envy, the roots of which are in nineteenth-century "property is theft" idealism.

How quaintly archaic.

I paid for myself, my family and my superannuation. I was taxed all of the way and there were taxes on taxes. The same applied to my parents.

As I look about me there are many who have enjoyed the freedom I never had to enjoy living. I paid for their living, their mistakes and their children too, and even for their gaol where they were stupid and mongrel enough to commit crimes as well.

Now I will be taxed on my superannuation payments and also for any more work I do. The bludgers around me and there are many, just as there were many who had jobs but blew their money on enjoyment, booze, gambling and holidays, or simply bad ideas, are now enjoying the fruits of my labors and the labors of my children as well. But I am still being taxed and heavily, and I get none of those guvvy services free!

Then along comes someone who wants me to agree to taxing my death - death taxes. Yeah, right!

What about I take myself and those well-educated children and their children to another country? We are encouraged to see ourselves as global citizens anyhow, so the political 'Progressives' say when they promote the 'diversity we have to have', according to them at least.

I will be interested to see how many of the migrants, especially from the Asian region will be putting up with the lazy and spendthrift Aussies, as Australian taxpayers have done up to the present. My Asian friends tell me that while they may provide limited support between blood relatives, charity does NOT extend out of the home to the community. That would be contrary to their culture. OK, that is reasonable too, but some here have a surprise in store for the future, maybe soon.

What about I take myself and those well-educated children and their children to another country?
onthebeach,
I don't like your chances of being accepted unless you vehemmently deny you're Australian.
Unlike Australia other countries are only interested in ridding themselves of bludgers instead of inviting them in.

Pericles, are you aware that my kids will most likely inherit more than a half a million each, which would mean the tax would effect my asett base.

So sorry, but my views are not envy driven at all.

I've worked hard myself but I honestly don't think any one person should be entitled to inheritance above half a million tax free.

However, these are my views and I respect the views of others, but you must understand, I speak from the other side of the fence.

onthebeach,
I just realised the wording in my last post is misleading as it infers you're a bludger. Please accept my appology it wasn't meant the way it came out.