Inheritance tax, also known as estate tax, varies widely across the globe, impacting how wealth is transferred from one generation to the next.
Australia: Unlike many countries, Australia has no inheritance or estate tax. However, beneficiaries may face capital gains tax (CGT) if they sell inherited assets.
- Labor Party: The Labor Party has consistently denied any plans to introduce an inheritance tax, often referred to as a "death tax". Despite claims from opponents, Labor maintains that families should have the autonomy to manage their financial decisions without government intervention.
- Coalition: The Coalition has used the threat of a "death tax" as a scare tactic against Labor, but there is no evidence to support these claims. The Coalition itself has not proposed any inheritance tax and continues to emphasise lower taxes and economic growth.
Neither major party in Australia at present supports the introduction of an inheritance tax, focusing rather on other economic policies.
Australia did have an inheritance tax, known as ‘death duty’, until 1979. Before then, any money inherited from a deceased person was subject to a tax. The rate varied over the years, and at its peak, the rate could go up to 75% on estates above a certain threshold.
In Australia, capital gains tax (CGT) does not apply when you inherit an asset.
However, CGT may come into play if you later sell or dispose of the inherited asset. Here’s a quick rundown:
- Main Residence Exemption: If the inherited property includes a dwelling and you sell it as part of the main residence, you may be exempt from CGT.
- Separate Assets: If you sell land or a structure separately from the dwelling, CGT may apply.
- Foreign Residents: If you or the deceased was a foreign resident, different rules may apply, and CGT could be triggered.
New Zealand: New Zealand did have an inheritance tax, known as estate duty, which was first introduced in 1866. The rate varied over the years, but it was abolished in 1992.
United States: The U.S. imposes an estate tax on the net value of an individual’s estate at death. The top rate is 40%, with an exemption threshold of $12.92 million for individuals.
Japan: Known for its high inheritance tax, Japan levies a top rate of 55%. This can significantly impact large estates.
United Kingdom: The U.K. has a flat inheritance tax rate of 40% on estates over £325,000. Spouses and civil partners can inherit without paying tax.
France: Inheritance tax rates in France range from 5% to 60%, depending on the relationship to the deceased and the value of the estate.
Germany: Germany also has a progressive inheritance tax, with rates ranging from 7% to 50%.
South Korea: South Korea imposes a 50% inheritance tax on estates over ₩3 billion.
Netherlands: The Netherlands has a flat inheritance tax rate of 40%.
Spain: Spain’s inheritance tax rates range from 1% to 34%, depending on the recipient’s relationship to the deceased and the estate’s value.
Ireland: Ireland’s inheritance tax rates range from 33% to 55%.
Chile: Chile has a flat inheritance tax rate of 25%.
South Africa: South Africa also imposes a 25% inheritance tax.
Understanding these differences is crucial for global citizens and investors, as it affects estate planning and wealth management strategies.