Retirement
Inheritance not a ‘magic bullet’ for wealth
With new research forecasting that young Australians won’t follow the same wealth trajectory as their parents, it also flagged that inheritance isn’t a “magic bullet” for younger generations in the way it once was.
Inheritance not a ‘magic bullet’ for wealth
With new research forecasting that young Australians won’t follow the same wealth trajectory as their parents, it also flagged that inheritance isn’t a “magic bullet” for younger generations in the way it once was.
The Grattan Institute’s research has predicted that young Australians could be the first generation in living memory to have a lower standard of living than their parents, and thereby argued for a rethink of inheritance practices as worthy of consideration.
Now, inheritances “tend to come later in life and are much more likely to go to people who are already wealthy”, the thinktank said.
It flagged that more than 80 per cent of money passed down from parents is being received by people aged 50 and over, with the most common age bracket for receiving an inheritance being the 55-59 age bracket.
The research also showed that people under 45 are more likely to report receiving a gift from their parents than an inheritance in a given year.
These gifts tend to be small and are reported as being less than $1,000 a year on average.
According to the Grattan Institute, the findings mean that the growing wealth of Baby Boomers is likely to end up concentrated in the hands of a select group of relatively well-off Generation Xers and Millennials rather than being widely spread.
It reported that Australia is one of only seven OECD countries without any inheritance, estate or gift taxes.
Considering older Australians are now wealthier than ever before, and given inheritances are likely to grow, the Grattan Institute stated that governments should consider taxing intergenerational wealth transfers to fund income tax cuts across the board.
At a minimum, it advised that taxpayers should stop subsidising inheritances through superannuation tax concessions and exclusions from the age pension assets test.
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