Here is a hypothetical scenario, but quite often true.

Say a couple purchased 200 acres of land on the outskirts of Brisbane in the 50's, built their home and all up spent in dollar terms, say $20,000.

Lets also assume they have now passed away and had three children and ten grand/Ggrand children and their property sells for $300 million.

As it stands today that wealth would be shared (assumption) between just 13 people, resulting in $23 million each, give or take.

Is this fair and just?

What if a law were introduced to say the maximum and beneficiary can receive 'tax free' is $500,000. This would mean inheritance tax apply to the remaining $274 million.

I know ive said similar before, but we are taking about tax reform and we have been told everything is on the table. But is it!

No, they should not pay death taxes.

Why is everyone always talking about raising taxes?

What about keeping to a budget, both state and federal governments should look at wastage (public servants wages and benefits, grants, arts funding, human rights commission, foreign aid, the list is endless)

If governments only spent on education, health, defence and law (ASIC, ACCC etc) We would have enough to fund these and give TAX REFUNDS to working people.

As I have said before the ATO says for every %1 collected in income tax revenue, 40 cents is wasted. That is only 60 cents pays for hospitals, defences etc.

If you gave every working Australian $1 they would spend it and produce a 3-4 fold effect. You buy something, the retailer makes a profit, he buys something and the circle continues. Now with GST the government gets 10% on each transaction, everyone wins.

Lower taxation is the only way to stimulate the economy without causing huge debt problems down the track.

The more tax revenue, the more government spending meaning more tax revenue is needed. It is a never ending path to lower living standards

In australia 579 companies can work there tax bill down to nothing, That must be fixed before anything else can be dreampt up.

Dear Rehctub,

What you describe has nothing to do with inheritance, but with the loophole in capital-gains tax which allows unlimited exemption when selling one's home. This way, if one of the children lives in the parents' estate for a year, they can then sell it tax-free, then distribute the proceeds among the rest of the family without paying any tax.

Had they sold the house immediately, then capital-gains tax would apply.

On the other hand, capital-gain tax as it stands is unfair because it doesn't take inflation into account: $20,000 of the 50's is much more today. To make it fair, capital-gains tax should be charged like any other income at one's full tax-margin, but after adjusting for inflation.

Now suppose the parents did not live there and sold those acres before their death: then they would already have paid capital-gains tax, so charging the children an inheritance-tax on top would be unfair.

Yuyutsu,

Wrong on several points:

1. CGT only applies to items bought after 1985.
2. CGT doesn't apply to items bequeathed to a relative
3. CGT profits (but not losses) ARE inflation indexed.

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The trouble with death duties is that they are so easy to avoid. In the example mentioned, if there were death duties, the family could institute several policies to avoid them eg - set up a company with all kids having say 100 shares each and the parents one share each, sell the house to the company for reduced figure (no CGT), rent the house back to the parents at some reduced rent. Upon death the duties are then paid on only a small fraction of the value.

To overcome this you then introduce gift duties and then they find some other mechanism. In the end we end up with a massive administrative mess, accountants making money on schemes and no extra taxes being raised. That's why they got rid of death duties.

Dear Mhaze,

1. True.
2. That's an unfortunate loophole: no tax should apply when someone (relative or otherwise) receives an asset, but if/when they sell it, they should then be paying CGT based on whatever the asset was originally bought for.
3. Only if purchased before 1999.

The trouble with death duties is that the same long-dead person who originally earned it for their future generations, unfairly pays again and again and again, often even to a state they never resided in, or which didn't even exist in their days.

It's natural and healthy for money/assets to run in the family for generations on end, where it is being used as security for subsequent generations, so those who need it (for example if they fall ill, become disabled or lose their home through natural or made-man catastrophes) can draw on it and those who are more fortunate can increase it. The family's money does not belong to any state, especially as a family could be spread around the globe regardless of who currently happens to hold it on trust. This money is likely to have been generated long before Australia was even created and perhaps to be needed and used once it no longer exists.

If anyone has done any research on inheritance tax in other countries, it has been devastating to family run businesses, farms etc, and for those with genuine fortunes, the shift of capital to trusts ensure that very little in death duties are paid.

It is one of those taxes that the ideological left love, but actually end up burdening the middle class.

I am a firm believer in no inheritance
taxes whatsoever. People have already
paid taxes whilst still alive
this would be "double-dipping" and why
force them (their children) to keep on
paying? Not very fair!

I forgot to add that I would make the suggestion
to anyone wanting to leave their homes to their
children to put the property in the name of their
children not their own. That way they would not have
to pay inheritance taxes.

So what you are all suggesting is that half a million of inheritance per sibling is not enough. Why?

In the case of a farm this is a commercial enterprise which pays taxes and draws losses all the way along and if continued as a farm well it has not been sold. But, if a property has been sold (this is the only time an inheritance can be realized) then that is a different scenario. Also, if a business, in this case a farm, has been run as a viable enterprise then once sold it should be subject to CCT as tax breaks have already been claimed.

As for a property having been purchased in the 50's having a company/trust arrangement, this would be very unlikely given the era, however, if the property was transferred into a company/trust, then legally it would have been sold and no longer a personal asset of the original owners.

I just fail to see how a lost relative, having had little to no contact with the long term owners of the asset can be freely allowed to have a financial, 'tax fee gain' of millions.

As for buying a property in the name of a child the only way that could be done was with cash, as banks would be very reluctant to lend to minors.

I'm really ignorant when it comes to this kind of stuff.
I have a friend who is currently in the process of having his mums house sold and the proceeds distributed between himself and his two brothers.
One of the brothers lives in the house, and wants a bigger share and is being difficult with the sale process.

Thanks mhaze for the CGT info.

Here's my 2 cents.
I don't think the government should be helping itself to anyone's gifts of inheritances, even if the person does receive a substantial capital gain.

I see it as double dipping by the government.

No matter what gift or inheritance or whatever you received, is it not true that the person who originally purchased the item probably already paid his taxes and these items represent his or her after income-tax purchases / savings / assets.
The government already got their share.
Why does it need to get another piece of the action?

Rehctub
"I just fail to see how a lost relative, having had little to no contact with the long term owners of the asset can be freely allowed to have a financial, 'tax fee gain' of millions."

Why not?
Are you saying the government should be entitled to something that never belonged to it?

Arm Chair, what Im saying is that many properties now sell in the tens of millions and we are in a position whereby we need to find ways of plugging the hole in our tax revenues.

Given there would be an allowance for one to inherit half a million tax free, is this enough.

rehctub,

What you are proposing is that the elderly should be scared witless of the onerous death duties to be paid by their heir/s to the estate that they would be forced to sell the farm/business before death.

Even if they don't sell prior, the heir would have to do it to pay the ATO debt.

That is a sure way to have productive farms divvied up as farmlets and housing estates.

Assuming that you are developing a meat business, how might your wife and children pay the ATO death duty bill (and your funeral costs) if you met with a premature death? Think about the massive hits they would take.

Dear Rehctub,

<<So what you are all suggesting is that half a million of inheritance per sibling is not enough. Why? >>

Because this money was already taxed when earned, in some countries and until the 1980's even here incurring >50% tax. If a certain static sum of money passes on as security for 100 generations, are you suggesting that Australia may tax it 100 more times? Even when the original sum was earned outside Australia or long before Australia even existed?

The person(s) who happen to receive the sum may only be trustees for the family's wealth and never use it themselves. That wealth could be intended to secure the family indefinitely for many generations to come, so they never have to depend and fall on states and tax-payers if they fall ill or have an accident. What right have you to touch that money only because its trustee(s) happen to live in Australia?

I am surprised at you rehctub, getting it so wrong, or back to front.

We have no hole on our tax revenues, but one in our government's money vault. This hole was partly the vindictive passing of huge forward spending by the redhead, in her dying days. It is the excessive spending of this & other rubbish that is the problem.

I am surprised you do not see that Turnbull is continuing the trend, with vote buying spending on nothing useful, trying to gain popularity.

The last thing we should do is give him even more money to waste on ego driven vote buying.

From the other side, there is absolutely no reason that the government should have a call on any gains by people investing tax paid money in any way. If they chose not to pi55 is up a wall but invest it, surely they & not the wastrels should gain from this.

From another point of view, if you are talking about a family dwelling, surely the kids should be entitled to inherit a dwelling such as their family home.

You may have missed the fact that it is only the 2.5 acres around a family home that is free of capital gains tax. This is only the case if it has not been used for gaining financial reward as well. Any other additional area, even if only used for family leisure is still subject to capital gains tax.

Smaller properties become capital gains tax exempt after they have been part of your primary place of residence for 20 years, provided no income has been earned from them.

Continued

Continued.

Smaller properties become capital gains tax exempt after they have been part of your primary place of residence for 20 years, provided no income has been earned from them.

My property has had considerable increase in value, at least according to the Valuer General, & don't the council take advantage of that. However there are considerable costs in holding a property for a long period of time. Just the ridiculously high rates are exorbitant. For almost $4300 I get nothing but 3 hours of a mobile library 48 times a year.

In my 23 years, I have fenced the boundary twice, at huge expense. Internal fences, gates, tracks, slashing & mandatory spraying of declared noxious weeds has also cost a small fortune. This year alone has seen $4500 on the tractor, & $2500 on less than a hundred meters of farm type fencing repairs around the house paddock as extras.

Having to pay contractors to do more of what I once did myself will eventually force me off the place. The kids are helping more, as they want to keep the place, but they can't live here permanently, as the council in its stupidity will not permit more than one building with a kitchen, even on 20 acres, & banned subdivision, even for family homes.

I think you are all missing the point, im not talking about a family home that is not sold, I am talking about a large parcel of land that is sold off once the owners pass. read my original post.

Has been the CGT only applies to larger lots acquired post 1982/3, not sure! The example I gave was the 50's.

Do you all agree that a property, say 200 ac on the outskirts of Brisbane, purchased for $30K (in todays terms),then sold off for 200 million should be tax free.

I have to question that.

As for farms, they are businesses and attract CGT if they have been run as a business.
This is my question.

Rehctub, one of my neighbours, on the other side of my river boundary was born on his 1800 acres. He spent a lifetime working the property, doing OK, but as with most farming activity, he was not rich enough in his late 60s to give each of his kids who had put in thousands of hours on the farm, even a house on an acre block, in this then pretty cheap area.

Again our fool councils would not give permission for him to give each kid a house on the property, or a few acres to build one on.

He finally teamed up with a surveyor who knew the way development worked, & how to handle the idiot bureaucrats in council, & split off 300 acres, subdividing it into first some into 2 & 3 acre blocks, then a bunch of 4000/5000 Sq metre blocks.

My wife is a JP, & they were regularly in here getting stuff witnessed, & crying about the latest stupidity directed at them by bureaucrats, particularly the ratbag green ones who somehow gravitate into jobs where they can do the most harm.

They were most expensively in court 4 times to stop the more outrageous demands, after all approvals, by the green ratbags in council. They have now done OK, but are not rich by any means.

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Continued

Neither is my dairy farmer mate. Another born on his farm, at 85 he still works 7 days a week helping his son who has taken over the farm, fool that he is. The fact that a well run 1000 acre dairy farm, running 340 cows does not earn enough to pay more than 2 staff shows how stupid the deregulation of dairy farms was by the academic ideologues & lefties.

All they have achieved is to give most of the profit from milk to the big two, Woolworths & Coles, taking it off the productive sector, the farmers. The fact that his is the only dairy left of the 12 here 20 years ago proves the point.

If they give up & sell out, I believe they deserve every cent tax free. Most certainly not one cent should go to any government. It is those governments who destroyed a thriving industry, by listening to useless academic advisers.

I don't believe there are too many bought 200 acre blocks just to sit on, particularly 50 years ago. Any that did would have found the encroachment of suburbia a bloody menace, & deserve every cent that encroachment finally gave them.

Small block sub development like Yarrabilba rapidly become tenanted semi slums bringing thousands of undesirable element into rural areas. People around these places them require big dogs, & have to find the house keys they misplaced years ago. The little increase in sale value of existing properties is little recompense for the disruption to their lifestyle.

Have you noticed, on this one, I disagree with you in every possible way?

sorry for the late reply has been, but the farms you refer to are businesses, and as businesses claim tax exemptions along the way, their land once sold is a taxable asset. Im sorry, but even if it is a tough business, one cant on the one hand grab the handouts, then on the other pocket the winnings tax free.

As for the dairy industry, I hear you loud and clear and its just another outrage and is one reason behind the Chinese invasion as the Chinese know that at some point our farms will become unviable and we will have little choice other than to shut them down and import everything. once this happens the Chinese will import their own labour.

One thing you have to remember about tax exemptions rehctub, & things like drought subsidies, they are only of any use to someone with a moderate to large tax bill, or any money to buy fodder.

When I looked at it many years ago, it would save me less than 10% of the freight bill, & nothing on the actual fodder. That sort of help is the quick way to bankruptcy.

I think it would definitely be unfair for the descendants to be paying inheritance taxes and if I were to be in that situation, I would rather forgo any inheritance amount to save me on paying additional taxes. I guess there are still many aspects of tax reform we need to clarify since the topic is quite vague as it is just too broad.

webbrowan, Turnbull knows much of his support is actually from people who will never vote for a local coalition member. He knows he has a pretty good chance of getting the old heave ho, unless he can buy a lot of votes.

He is casting around, hopping that some area of him ripping vote buying taxes out of people, that will actually be popular with people who would actually vote coalition.

He is looking more like a leader of the Labour party every day. He'd better go soon, or he will be history.

'Tis pretty clear that a specific inheritance tax is a bad idea. But is there any good reason why inherited income should remain exempt from income tax? Or why inherited assets should not be subject to capital gains tax when sold?

Dear Aidan,

Indeed I cannot see why inherited assets should not be subject to capital gains tax when sold.

now "why inherited income should remain exempt from income tax?":

- Well, if you could find an inherited income, then it should certainly be income-taxed, but I don't think that you can find any such animal.

Inheritance is not an income, it is after-tax wealth that is simply moved within the same family from one pocket to another. Imagine being taxed if your pants were torn and you had to move the money from its pocket to a new pants... Now imagine that over the years you wear off and change 20 pairs of pants and subsequently have to pay tax on that same money 20 times over...

still you all miss the point here, I am not talking about an inheritance of property or other asset, I am talking about the cash inheritance received once the asset has been sold off.

At no stage have I mentioned taxing the value of a 'non realized' profit as Im strictly talking about an asset sold off, mostly to developers and the likes.

Lets take a farm. It has been run as a business for decades and improvements such as sheds and other income producing assets have been written off. So the gain is no longer an 'after tax gain' at all.

Where I live a 5 ac block that is ripe for development sells for about 3 million. So lets assume it sells for $30 million in thirty years from now. Let's further assume that the only beneficiaries are two great grand children. Should that inheritance to these grand children remain tax free.

Remember, my suggestion (in todays values) is for the first half million to be tax free, then 48c/$ for the balance.

At what point do we say fair is fair and at what point do we look at sharing the wealth, especially if the only reason these two received so much was because they were born lucky.

rehctub, "at what point do we look at sharing the wealth, especially if the only reason these two received so much was because they were born lucky"

Socialism.

Dear Rehctub,

The fact that the grandchildren are lucky is irrelevant:

If it is your money, then you ought to be able to do with it whatever you want, including to give it to whoever you want. Some people are motivated to work only because they want the income for their future generations, rather than for themselves in person, or for any other cause for that matter which endures after their death: if you don't allow them to do so, then why would they have worked hard and saved all their lives in the first place?

Thus we are not talking about the rights of the grandchildren - we are talking about the rights of the grandparent!

(of course, it's a different matter if the grandparent haven't yet paid tax on those profits, in which case they are not truly his/hers yet)

well, I guess all I can say if fair enough!