Last week’s budget has been met with absurd hysteria as vested interests, and conservative politicians and media pushed lies about the collapse of the housing market and death taxes.
You can always tell when conservatives are flailing when they start arguing a policy will work but there will be (shudder) “unintended consequences”.
This week the Australian Financial Review suggested that because the changes to the capital gains discount and negative gearing would likely either lower house prices or at least slow price rises that will mean states get less stamp duty.
The AFR reported “research” from property industry company SQM Research that if the number of houses sold fell 30% “the five largest states could lose a total of $9.2 billion in stamp duty in 2026-27”.
A 30% fall in houses sold?
That would require an 80% fall in investors buying established houses and none of the gap taken up by prospective homeowners.
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It’s amazing how desperate property types are to demonstrate that the 50% CGT discount had nothing to do with housing supply and was just about investors making easy profits from buying up established houses.
Given the changes are estimated to raise $2.2bn in the budget by 2029-30, that’s a hell of a cost everyone is paying so the 7% of (mostly older) taxpayers who earn capital gains can pay a lower tax rate than the 80% of (mostly younger) taxpayers who earn a salary or wage do.
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The other fear campaign launched since the budget is no less absurd, but rather more gross.
It has coincided with conservatives discovering that minorities need to be protected.
No, not Indigenous people, not trans men and women, not migrants, not people with disabilities (those NDIS cuts are rating nary a concern).
No, the minorities that News Corp, the AFR and the Liberal-National-One Nation party believe need protecting are the rich. And specifically, the rich who have testamentary trusts.
The changes made to limit the tax avoidance in trusts has seen the resurrection of the old death-tax fear campaign.
It is total bollocks, but even if it were true, let’s just note how few people would be affected.
Most people have never heard of testamentary trusts. That’s because they are a small fraction of trusts.
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Discretionary testamentary trusts are set up to allow the division of assets to family after your death. They are the same as other discretionary trusts that are used to minimise paying tax from investment earnings, except they only come into effect upon your death.
You can make them fixed – ie a trustee can only pass on the assets to those in the trust in a pre-arranged way, but this is not so great for the tax benefit.
As Qld Estate lawyers note, “a testamentary trust can offer enhanced control, asset protection, and tax advantages”.
Importantly, no tax is paid on the money when it is put in the trust – that would be an estate tax – and neither will it under the changes.
The income received from these trusts is already taxed, all that is proposed to be changed is a reduction in the tax breaks to this very small number of people who will be beneficiaries of such trusts in the future.
Crucially, the changes are grandfathered – so if you are already getting income from such a trust, nothing changes.
The death-tax fear campaign is not just absurd because it is false, but because most other countries carry on with taxes on estates without descending into forced public readings of the communist manifesto that the Daily Telegraph suggests Jim Chalmers wants to happen.
The UK and US have them, as do 25 of the most advanced economies in the world:
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If Australia raised as much tax from estate duties as, for example, the US, (which has a minimum threshold of $15m), it would raise about $3.5bn. If we follow the UK we would raise about $6.5bn.
Such taxes are progressive as they only hit the wealthiest (in the UK only about 4.6% of estates pay the inheritance tax).
Australia used to have estate duties, but in 1977 Queensland premier Joh Bjelke-Petersen axed it and all the other states followed out of fear retirees would leave to die in Queensland (which was Bjelke-Petersen’s aim).
In the 1950s state estate taxes raised about 0.35% of GDP. Were that raised now it would be about $10bn.
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So an actual tax on estates would raise maybe $3.5bn – $10bn depending on what methods were used.
That’s potentially not a lot of revenue for the level of political pain that would occur.
Even though the government is not even close to bringing in a death tax, it already has to deal with a full-scale attack because the media and opposition know a “death tax” is unpopular.
Fortunately, the government could do something that is popular and would raise much more revenue. The $17bn gas export tax has majority support, and only scares extremely profitable gas companies – those same ones who are right now spreading fear about the end of times due to a gas reservation, all the while their share prices rise:
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The was no death tax in the budget, and even if you like the idea from a progressive point of view, the political cost is well beyond what the Albanese government would be prepared to wear.
It would be much better for progressives now to push for even more revenue to pay for better services and support by targeting rich gas companies, rather than opening themselves up to another fear campaign suggesting the government is coming for everyone’s inheritance.
• Greg Jericho is a Guardian columnist and chief economist at the Australia Institute
