Victorian Government’s death tax proves it is lacking ideas
If you are looking for proof that Victoria’s Allan Government has run out of time and ideas, the mooted “stealth death tax” it is looking to introduce should be exhibit A.
Proving once and for all that it has learned absolutely nothing from the ill-fated and eventually High Court banned electric vehicle tax, the proposed increases in probate fees are staggering in both size and “soak the rich” opportunism.
And, like the stupid EV Tax which saw owners taking pictures of their odometers and sending them in to work out how much they had to pay, this tax rise is also highly impractical and prone to avoidance.
After all, when the increases range as high as 650% for a service which most lawyers complete in under an hour, the size of the “windfall” extra $11 million for the State Government is ridiculously small for creating such a frankly upsetting new death tax that will hit people at the most inopportune time.
Already lawyers are warning that it could cause some people to refuse to be executors of larger estates due to the up-front bills that will need to be paid, possibly as an interest free loan, and the reluctance of even large law firms to be on the hook for such large amounts of money long before an estate is finally settled.
Compared to cost overruns, this is very small beer
Given that the extra revenue represents just 0.001% of just the $10 billion (so far) cost over-run on the North East link toll road alone, it also represents a revenue needle in a massive and growing debt haystack.
To give you an idea of how huge these probate charges are, estates valued between $250,000 and $500,000 will have to pay $514, up 650%.
Estates valued between $1 million and $2.5 million will cost $2,563.80 while estates valued between $2.5 million and $5 million will cost $7,185.20 and estates above $5 million will cost $15,407.40.
Overall, the probate costs have risen by 564%, with the higher fees expected to generate an extra $11 million of revenue, taking the amount raised to almost $44 million.
No indexation will see high costs hit more estates over time
Of course, there is no mention of any of these thresholds being indexed over time, so the number of estates captured by the higher rates will increase greatly over time.
One stated advantage is that under the new system smaller estates would face lower fees and potentially no fees at all, although there are probably not too many estates declaring assets below that threshold of $129,850.
It is not too hard to see what is being attempted here – a straightforward filing fee for the Supreme Court to determine that a will is valid and the executor can administer the estate is being turned into a wealth-based tax base – another stamp duty if you like, which also effectively transformed over time into a major tax base.
‘Leading’ other states in fees
The only stated justification from the State Government for such massive percentage price increases is that Victoria’s current fees are lower than those charged by other states.
That perceived “problem” seems to have been fixed under this proposal with estates over $5 million to cost Victorians more than $15,000, compared to around $6,700 in NSW and about $2,000 in Tasmania.
Previously, Victorian probate fees were set at a flat rate and capped for estates valued at $5 million or more at $2,318.90.
So, Victoria would certainly comprehensively get rid of that “competitive advantage”.
The new fee structure is now going through a process of community consultation which is set to close on 19 July before a final recommendation is put before the Attorney-General Jaclyn Symes.
Interestingly, lawyers have already been suggesting a number of ways in which people can avoid some of the expanded probate fees, with the major ones being leaving money directly through superannuation, holding assets in trusts and owning assets jointly with other family members.