Australia’s incoming Productivity Commission boss as said the government should consider introducing an inheritance tax.

Danielle Wood, emphasising these were her personal views, said such a tax was necessary despite the fact it would be “political dynamite”.

Wood, who will leave her current role at the Grattan Institute to take up Productivity Commission role, said an inheritance tax was a way the government could raise needed funds.

“We know that there is a growing pot of wealth, sitting in the hands of older Australians that will be passed on in coming decades,’’ she said.

“You would set some kind of threshold for the size of inheritances and only tax above that amount.

“It’s just a very politically sensitive topic.

“I think it’s because it’s seen as kind of interfering with a personal transaction, which is sort of given out of love, and I understand the sensitivity of that.

“But in a world again, where we need to raise money, we’re otherwise going to be pushing a huge burden onto future workers.”

Wood suggested an inheritance tax could kick in at $1 million or $2 million. This would mean most family homes passed on as an inheritance would be subject to tax.

She stressed that her “longstanding” personal views on taxing people’s family inheritances would only become part of her new role if the government asked her advice on matters of taxation.

“I’ve said this for a long time that I think we need to raise more revenue,” she said.