What was claimed
The government is introducing a death tax that will take 30 per cent of inherited assets.
Our verdict
False. The changes only affect future asset income and won't tax the total value of inherited assets upon death.
AAP FACTCHECK - The Albanese government isn't introducing a "death tax" on the value of inherited assets, despite viral claims spreading across social media.
The government has proposed changes to tax on income from some trusts and a new capital gains tax (CGT) regime that have implications for how people pass on their assets to future generations.
But this isn't the same as a tax levied on the total value of inherited assets upon death, like an estate or inheritance tax.
Instead, the trust changes target the income from assets held under certain trust structures and will only increase the amount of tax paid in certain circumstances.
The claims have spread across social media over the past month in the wake of the federal budget on May 12.
One Facebook video claims Labor has announced a 30 per cent death tax on inherited assets.
"So what happens is, if you die and, you know, your money or your assets go into a trust and then has to get split up around family or whatever it's being split up against, the government want 30 per cent of that," a man in the video says.
He then claims the tax changes only apply to those earning between $45,000 and $135,000.
These claims are false. The government hasn't proposed changes which will levy a 30 per cent tax on inherited assets.
The proposed trust changes would levy a 30 per cent minimum tax on income from some trusts, not on the total inherited assets as claimed in the video.
This is also unlikely to increase the tax paid by trusts in which all beneficiaries are within the $45,000 to $135,000 tax bracket, as these would already face a 30 per cent tax rate.
Tony Martins, a tax expert at the University of NSW, told AAP FactCheck the claim in the video is incorrect.
"The government has not introduced an up-front tax levied on the total value of an estate when a person dies," Mr Martins said.
'A fact sheet about the policy explains that the minimum tax would apply to discretionary trusts, where trustees are able to choose how it distributes income between trust beneficiaries.
The proposed changes are designed to address "income splitting", where trustees reduce their tax liability by splitting income from assets between beneficiaries who are on a lower marginal income tax rate.
For example, the fact sheet states if a trust makes $200,000 in income, a trustee could split this between family members who earn no income and therefore pay an average tax rate of just 12 per cent.
By contrast, a person on a $200,000 salary would have an effective tax rate of around 30 per cent.
Under the proposed changes, the 30 per cent minimum tax will be levied on the trustee themselves, meaning the income from the assets won't be able to be split between multiple people to achieve a lower tax rate.
This will also apply to testamentary discretionary trusts, which people set up to hold assets to be distributed after their death. However, those established before the announcement are exempt.
The fact sheet states the change would have no impact on trusts distributing to beneficiaries who have a marginal income tax rate of 30 per cent - those earning $45,001 to $135,000 a year.
Around half of discretionary trusts are not expected to be affected by the changes, the fact sheet states.
These changes only apply to discretionary trusts. Others, like fixed trusts, are exempt because they can't be used to split income.
The minimum tax will also not apply to deceased estates, the fact sheet states
However, Mr Martins said that because the changes remove this "longstanding advantage", some families will pay "significantly more tax" on earnings that inheritance generates.
The government is also introducing changes to CGT - a tax on the profit you make when you sell something that has increased in value.
It introduced draft legislation on May 28, however this will also not result in a tax on the total value of inherited assets, just the inflation-adjusted profit made at the point of sale.
Donovan Castelyn, a tax expert at the University of Tasmania, said the draft does not introduce any tax on the transfer of assets at death.
Instead, the changes are scrapping an existing discount for capital gains accumulating after July 1, 2027 and introducing what's called cost base indexation.
Under existing rules, if an asset is held for more than 12 months then CGT is applied to half of the profit made at the point of sale, a budget fact sheet explains.
This is being replaced by a cost indexation method that will adjust capital gains for inflation and levy a tax on the real value of those gains when they are realised, such as when an asset like a property is sold.
It is also introducing a minimum 30 per cent tax rate on these capital gains, rather than a person's marginal tax rate to prevent people from deferring capital realisation to years when their marginal rates are low, the fact sheet states.
"The 30 per cent minimum applies to real capital gains after indexation, not to asset values themselves," Mr Castelyn said.
Again, those earning between $45,001 and $135,000, already face a 30 per cent tax rate on capital gains.
Those on a pension or unemployment benefit are also exempt from the minimum tax rate, the fact sheet states.
Additionally, Mr Castelyn said that an existing protection, which exempts the transfer of assets as a result of a death (inheritance) from CGT, is not being changed.
That means assets transferring to family members after a death doesn't trigger CGT.
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