We have been lucky in Australia that there has not been any probate duty for decades, and that inheritance from a deceased estate is not taxed as income. Luckier still, in Victoria, we have had one of the lowest costs on probate in Australia – in other States, probate fees are based on the size of the estate, but here the Supreme Court just charges a fixed fee of about $300.
With a Federal Government that is looking to raise revenue, and a tax system under review, there is a possibility that a death tax will be back on the table, along with an increase to the GST. This week, Treasurer Scott Morrison refused to rule out a death tax.
I do not necessarily think that these would be negative things, but they are something else to live with and plan for.
If any death tax was introduced, there would have to be an exemption for primary production. There would also have to be a tax-free threshold, I would suggest, so that small estates are exempt. I am not sure what that threshold would be, but our USA counterparts don’t get taxed on estates under $5m.
If death tax was introduced, estate planning would be more crucial than ever, so that your estate was structured in a way to minimise the tax payable by your loved ones after death. This would not be illegal tax avoidance – it would be working within the system to achieve the best outcome for your hard earned estate.