Nov 06, 2024

Profiting from Grief? Vic Government’s Increased Death Tax Labelled Price Gouging

Are grieving families footing the bill for Victoria’s latest revenue plan? [iStock].

The Victorian government’s recent announcement to overhaul probate fees has stirred debate and criticism, with many labelling the changes as “death taxes by stealth.”

These fees, paid to finalise a deceased person’s estate, are set to increase substantially for all but the smallest estates, creating potentially hefty financial obligations for grieving families.

What the New Fees Mean

The restructured fees, taking effect from November 18, waive probate fees for estates valued below $250,000, a move aimed at relieving low-value estates from additional financial burdens.

However, estates valued between $250,000 and $500,000 will now face a significant rise in probate fees—from around $68 to $514, an increase of approximately 650%.

Similarly, fees for estates valued between $1 million and $2 million will rise from $686 to $2,400, while larger estates valued between $3 million and $5 million will incur fees of up to $7,185. At the highest end, estates exceeding $7 million will attract a fee of $16,804.

A Comparison with Other States

Critics argue these increases place Victoria as one of the most expensive states for probate, especially for higher-value estates.

By comparison, New South Wales caps probate fees at $6,931 for estates over $5 million, while South Australia’s maximum fee is $3,826 for estates above $1 million. Victoria’s changes thus create a notable contrast with neighbouring states, raising questions about whether these fees disproportionately impact Victorians handling large estates.

The government, however, defends the fee hikes as necessary to cover the administrative costs associated with complex estate cases in the Supreme Court. Acting Attorney-General Enver Erdogan argued that this tiered fee structure ensures the highest-value estates bear the administrative burden.

He added that around 90% of Victorian estates fall below $2 million and will face lower fees than in New South Wales or South Australia, suggesting that the new structure remains fair for the majority.

The Controversy: Hidden ‘Death Tax’?

Shadow Attorney-General Michael O’Brien has strongly condemned the fee increases, describing them as an underhanded tax on the deceased. “This is an unconscionable burden on grieving families,” O’Brien remarked, adding that such measures only deepen financial strain at a sensitive time.

He asserts that this move is a symptom of financial mismanagement by the Victorian government, aimed at filling budget gaps by extracting revenue from estates.

O’Brien also highlighted the risk of “tax gouging,” noting that the probate office already operates with a budget surplus. He emphasised that these fee increases could lead to families restructuring assets to avoid the fees, potentially pressuring elderly Victorians to transfer wealth earlier than intended—a practice that some warn could exacerbate financial abuse of seniors.

A Revenue Strategy Under Scrutiny

The Victorian government’s decision to accelerate its review of probate fees follows a recent $20 million reduction in funding for Court Services Victoria. Critics argue that this cost-cutting decision, coupled with the new probate fees, shows a willingness to derive revenue from probate fees to subsidise broader court expenses, rather than simply covering the cost of probate administration.

Acting Attorney-General Erdogan maintains that the changes will keep probate fees at a fraction of an estate’s value—capped at 0.24%—which he argues is equitable.

However, critics contend that such explanations fall short, especially for middle-class families with moderate assets, who will feel the impact of these increased fees more acutely than high-wealth estates.

For many, these changes represent an added financial burden at an already challenging time, with the possibility of fees influencing estate planning decisions. As other states maintain lower probate costs, some argue that Victoria risks positioning itself unfavourably in comparison, prompting families to seek creative ways to avoid fees.

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