Inter-Generational Transfer Tax (IGTT)

An Inter-Generational Transfer Tax is a tax on the transfer of assets whether by way of gifts during the lifetime of the donor or by bequest after they have died.

Death duties are one of the oldest forms of taxation, and continue today in one form or another in about half of the western world. All Australian States and the Commonwealth had a form of gift and death duties from colonial times up until the late 1970s.

All significant assets and liabilities - real property and financial instruments of all kinds - are registered in some form and transfer to another owner requires a formal process. On death the process is ‘probate’ – determining the full assets and liabilities of the deceased, proving their will in a court (assuming they had one), and distributing their net assets according to their will or the directions of the court. It is relatively easy to apply a ‘death duty’ of whatever form at this stage. Taxing lifetime gifts is always more problematic, but is an essential part of a death duties regime if the tax is not to be routinely evaded.

The model assumes that assets transferring to a surviving partner are not subject to tax. All taxation falls on the transfer of assets from an individual or the remaining member of a couple to their beneficiaries.

The model allows you to:

• set a tax-free threshold below which no tax is payable;
• set up to five thresholds for the application of the tax;
• choose the rates of tax that apply at each threshold;
• choose whether to index those thresholds and if so which index to use;
• decide whether lifetime gifts to registered charities are subject to gift tax;
• decide whether non-charitable gifts are subject to gift tax;
• set a tax-free threshold for gift tax;
• set the rate of gift tax.

The model does not take account of any second round effects from introducing an Inter-Generational Transfer Tax.

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