Australia is an outlier when it comes to death taxes, largely due to former Queensland premier Joh Bjelke-Petersen. He started slowly, getting rid of probate duty in the early 1970s, before in March 1976 effectively abolishing overnight all of the state's inheritance and gift taxes. Loading Replay Replay video Play video Play video It was partly aimed at wooing potential migrants from NSW and Victoria as Queensland sought to establish itself as the nation's low-tax state, although the lost revenue from the end of death duties was made up by other taxes (and generous grants and loans out of Canberra). Bjelke-Petersen's decision forced all other states and Malcolm Fraser's federal government to follow suit with death duties gone by 1984.

But in the past decade, especially since the Global Financial Crisis, a few in the tax world have argued it is time for Australia to revisit death duties. The Henry tax review, in a recommendation that was rejected immediately by both Labor and Coalition, said there were major reasons to consider what it termed a bequest tax. It found "large asset accumulations" ended in the hands of a relatively small number of people, adding that bequests were likely to rise from $22 billion in 2010 to $85 billion in 2030. That's a large sum of untaxed income at a time when demographic change means the tax impost on wage and salary earners is increasing.

The Henry report also noted the "efficiency" of bequest or inheritance taxes. Loading Personal income tax, while relatively easy to collect, causes economic distortions. They include people who try to reduce their taxable income or those, particularly women, who hit high effective marginal tax rates due to the interaction of the tax system with welfare payments. In theory, inheritance taxes are efficient, as the person who leaves the inheritance is dead. They can't take that money with them into the afterworld. Research out of Germany last year found that inheritances actually encouraged people not to work. The larger a bequest, the more chance the person getting the windfall was to leave the workplace altogether.

A year after the Henry paper, renowned French economist Thomas Piketty released his international bestseller Capital in the Twenty-First Century in which he found that wealth pre-World War One was heavily concentrated and passed on among the world's richest families via inheritances and gifts. This was disrupted by the two world wars and progressive taxation including sizeable inheritance or estate taxes. But since 1980, wealth concentration among the very rich has increased aided by the reduction of death duties. Thomas Piketty's research into wealth inequality reignited the debate about inheritance taxes. Credit:AFP While the Coalition has repeatedly noted that income inequality in Australia has possibly fallen on its watch since 2013, wealth inequality has unquestionably risen. Figures from the Australian Bureau of Statistics suggest wealth inequality is up by 6 per cent since the middle of last decade. Growing international evidence showing a link between sub-par economic growth and large wealth and income inequality has led some organisations such as the OECD to back inheritance taxes over other, more populist, measures.

Grattan Institute budget policy director Danielle Wood, currently researching the issue of death taxes, admits such proposals are "heinously unpopular". But she said without change, wealth inequality across Australia would grow dramatically as wealthy people passed on assets to their children. Wealthy parents are much more likely to pass on large nest eggs to their children, due to high-priced homes and unused superannuation accounts, than parents of more modest means. Preliminary research suggests the wealthiest 20 per cent of Australians received an inheritance on average $110,000 more than others in the same age group. Grattan Institute fellow Danielle Wood said wealth inequality will explode over the next 20 to 30 years in part due to untaxed transfers from wealthy parents to wealthy children. Credit:Jeremy Weihrauch "In the next 20 to 30 years we are going to have a big increase in inequality as people who have been given large inheritances in their 50s and 60s start to die and pass those inheritances on," she said.