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Federal elections always offer the opportunity for a reset. Whoever wins the May 3 election should consider a much needed revamp of the tax system, which is no longer fit for purpose. The biggest challenge that should be addressed through tax reform is the level of inequality in Australian society.
The five-yearly Intergenerational Reports lay bare the intergenerational squeeze. The future burden of supporting the ageing population will increasingly fall on younger Australians who generally don't enjoy the same financial wellbeing of previous generations. But there is also rising inequality within generations.
Not all younger Australians can rely on inherited wealth, including the bank of mum and dad. And superannuation balances at retirement vary wildly, given they are tied to work history. Proper systemic tax reform would play a crucial role building a fairer society.
Reform freeze But to define what is meant by tax reform, we need to think about some of the big picture concerns that affect our economy. Arguably we have not successfully pursued a tax reform agenda since the introduction of the GST in 2000. Various governments have changed the tax rates, but that doesn't constitute genuine reform.
The Henry Review, commissioned by the Rudd government, set out the long-term horizon for reform – including resource taxes and road user charges for the transition to a net-zero economy. However, the Henry blueprint has not been adopted by any succeeding government. Politicians like to boast of "reform agendas".
Despite the political rhetoric, the tax system has not yet adapted to the 21st century. Wealth inequality The biggest gap in our tax base relates to the concessional taxation of wealth and assets, which is an area ripe for reform. According to the Treasury, the top six revenue losers all relate to superannuation, capital gains and negative gearing.
In 2024–25, the estimated revenue foregone for these concessions are: $29 billion for the concessional...
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