A recent 9News report highlighted renewed calls for Australia to reintroduce an inheritance tax, sometimes referred to as a “death duty”. The suggestion came in a paper from the Australia Institute, tabled at the Federal Government’s Economic Roundtable in Canberra in August 2025. The report argued that an inheritance tax, alongside other wealth-related measures, could raise billions for public services and help reduce “intergenerational inequality”.
It’s not the first time the idea has surfaced, but it has been decades since inheritance tax was last part of Australian life. Could it really return, and what would that mean for families here in Western Australia?
A quick history of inheritance tax in Australia
Inheritance tax was first introduced in Australia in 1914. By 1979, however, both State and Federal governments had abolished it.
That decision made Australia an outlier. Inheritance taxes are the norm across much of the OECD, with countries like the United Kingdom, the United States, Japan, France and most of Europe maintaining them in one form or another. Australia is one of the very few high-income nations without such a system.
For the last 45 years, the political appetite to revive inheritance tax has been virtually non-existent. Whether the pressures of today—including slowing productivity, the cost of an ageing population, and the sheer size of the wealth transfer underway—will change this stance remains to be seen.
Why now? The great wealth transfer
Australia is currently experiencing what commentators are calling the Great Wealth Transfer: a once-in-a-lifetime handover of wealth from the Baby Boomer and Silent Generations to their children and grandchildren.
More than $5.4 trillion in assets (much of it in property, businesses, and superannuation), is expected to change hands over the next two decades. The scale is staggering. Never before in Australia’s history has such a concentration of wealth shifted across generations.
This context explains why tax reformers are again eyeing inheritances. A transfer of this size presents not only opportunities for families but also a tempting target for government revenue.
The proposal on the table
The Australia Institute has recommended three major reforms:
- a 2% wealth tax on Australians with assets over $5 million (raising an estimated $41 billion a year)
- the reintroduction of inheritance tax (expected to raise around $10 billion annually)
- the removal of the capital gains tax discount (to raise a further $19 billion)
The inheritance tax proposal has drawn the most attention. The report suggests applying it to estates valued over $5 million, with the stated aim of reducing “intergenerational inequality” and ensuring the system focuses only on the wealthiest Australians.
But as with all tax measures, the devil is in the detail.
The devil in the detail
While a $5 million estate sounds very large (and in many ways it is), how that estate is structured and divided matters enormously.
- A $5 million estate passing entirely to one adult child, taxed at 2%, would leave that child with very nearly the full inheritance, hardly changing the outcome.
- A $5 million estate divided between a dependent spouse and several young children, however, would leave each with a much smaller share. A flat inheritance tax could significantly impact their financial security.
This is why overseas models, such as the UK’s, impose different rules depending on the type of beneficiary. Spouses, minor children, or those financially dependent on the deceased often receive carve-outs or reduced tax treatment. If Australia did reintroduce an inheritance tax, it would need to carefully consider who should be protected.
Risks for families and farms
Another concern lies with family farms and small businesses. Many of these are “asset rich but cash poor”. Their value lies in land, livestock, or equipment rather than liquid assets.
If an inheritance tax were imposed on paper wealth without sufficient exemptions, families could face a forced sale of land or parts of the business simply to meet the liability—on top of existing capital gains tax. Such an outcome would undermine intergenerational succession in farming and family enterprises, which are central to many communities in WA.
What this could mean for Western Australians
Inheritance is already a contentious issue here in WA. Our 2025 Inheritance State of Play in WA Report found that 60% of Western Australians expect an inheritance dispute within their family. Rising property values, complex family dynamics, and the sheer size of estates are already fuelling tension.
Layering inheritance tax on top of this could add further complexity, increasing the risk of disputes and confusion. For families, this underlines the importance of clear, proactive estate planning—not only to manage assets fairly, but also to anticipate how policy shifts might affect what beneficiaries ultimately receive.
Looking ahead
For now, inheritance tax remains a proposal only. Political support is far from certain, and history suggests Australians remain sceptical of such measures.
Yet the debate itself is a reminder of how vital it is to prepare. The Great Wealth Transfer will continue, and with it comes the need for careful planning, both to prevent family disputes and to safeguard against potential changes in the tax landscape.
If you are planning your estate, or worried about how future reforms could affect your family, now is the time to act. Thoughtful estate planning and tailored legal advice can help ensure your legacy passes as you intend.
