Aug 21, 2025

Wake up Australia: Government now wants to tax your home and your inheritance

Wake up Australia: Government now wants to tax your home and your inheritance

The Australian government is currently exploring controversial proposals to introduce an inheritance tax and to tax the family home by removing its capital gains tax (CGT) exemption. These measures, currently being during this week’s Economic Reform Roundtable, are an attempt to revenue raise, at the expense of the middle class, being framed as solutions to combat inequality.

Meanwhile, the ultra-wealthy, some of whom will be present at the  Economic Reform Roundtable, will no doubt evade any fiscal burdens through sophisticated financial strategies.

Taxing the family home

The proposal to end the CGT exemption on the family home, put forward by economists from the University of Technology Sydney and Melbourne University, is framed as a way to address inequality. They argue that the exemption, which forgoes approximately $50 billion annually in revenue, exacerbates wealth disparities by favouring homeowners over renters.

By including “imputed rental income” (the hypothetical rent homeowners would pay) and unrealised property gains in income calculations, these economists claim Australia’s progressive tax system is less effective at reducing inequality than it appears.

However, taxing the family home would have severe repercussions for middle-class Australians, who make up the majority of the 67% of households that own their homes, either outright or with a mortgage.

For many, the family home represents their largest asset, often accrued through decades of hard work and financial discipline. Imposing a CGT on the sale of the family home would effectively penalise homeowners for rising property values, which are often beyond their control due to market dynamics.

This could trap middle-class families in their current homes, as the tax burden would make moving to a similarly valued property financially unfeasible. As libertarian commentator Topher Field noted on X, such a tax would “shackle” homeowners, making it nearly impossible to relocate or upgrade without incurring significant costs.

Moreover, the proposal contradicts other government objectives, such as encouraging older Australians to downsize to free up larger homes for younger families. A CGT on the family home would disincentivise downsizing, as the tax could erode a significant portion of the proceeds needed to purchase a smaller property.

This policy would also hit middle-class retirees hardest, many of whom rely on the equity in their homes to fund their retirement. The suggestion that taxing homes would reduce inequality ignores the reality that the ultra-wealthy often hold diversified portfolios beyond residential property, allowing them to sidestep such taxes through trusts or offshore investments.

Revival of the “Death Tax”

The Australia Institute, a progressive think tank, has also advocated for reintroducing an inheritance tax, abolished in Australia in 1979, to raise an estimated $10 billion annually.

Proponents argue it would curb intergenerational inequality by taxing wealth passed down to heirs, particularly from large estates. However, history shows that inheritance taxes often disproportionately affect the middle class and small business owners rather than the ultra-wealthy.

Critics have long dubbed this the “death tax” for its punitive impact on families inheriting modest estates, such as family businesses or farms. When inheritance taxes were in place in the 1960s and 1970s, they were abolished due to public outcry over their detrimental effects on family-run enterprises.

Many families were forced to sell assets or close businesses to cover tax liabilities, a scenario that could repeat if the tax is reintroduced. Middle-class Australians, who may inherit a family home or a small business, would face significant financial strain, while the ultra-wealthy, with access to legal loopholes and tax planning, could mitigate their exposure through gifting strategies or trusts.

The Australia Institute’s proposal includes a gift tax to prevent tax avoidance, but this would further complicate the tax system and burden middle-class families who rely on intergenerational support, such as parents helping children with home deposits.

The claim that an inheritance tax would only target the wealthy is dubious, as thresholds and exemptions often fail to shield middle-class families from unintended consequences.

The middle class always bears the brunt

Both proposed taxes are presented as mechanisms to fund essential services and reduce inequality, but they risk placing an unfair burden on middle-class Australians. The family home, a cornerstone of financial security for many, would become a tax liability, eroding the wealth-building efforts of ordinary families.

Similarly, an inheritance tax would penalise those who have worked hard to pass on modest assets to their children, while the ultra-wealthy leverage their resources to avoid taxation.

These policies also fail to address the root causes of inequality, such as stagnant wage growth and rising housing costs, which have made homeownership increasingly unattainable for younger Australians. Instead of taxing the middle class, the government could explore reforms that target speculative property investment or close loopholes exploited by the ultra-wealthy, such as those involving trusts and offshore accounts.

Stop the tax grab on your home and family legacy

The Albanese government’s push to tax your family home and inheritance is a direct assault on middle-class dreams, cloaked in the guise of tackling inequality. These policies threaten to trap homeowners, dismantle family legacies, and let the ultra-wealthy escape through the usual loopholes.

Australia, consider this is your wake-up call. Let your voice be heard by writing to your MPs, join the conversation on social media, and demand tax reforms that protect hardworking families, not punish them.

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