Last month’s economics and productivity roundtable wrapped up with the government making it clear that it remains firmly in charge of the nation’s tax policy direction. While plenty of ideas were discussed, very few immediate changes are set to be introduced.
Aside from ongoing talks with the States about a road user charge for electric vehicles, the only confirmed measures remain the two small personal income tax cuts promised at the May election and the 15% tax on large superannuation balances.
Could Wealthier Australians Face Higher Taxes?
So far, governments have been reluctant to increase taxes on wealthier older Australians. However, both the Prime Minister and Treasurer Jim Chalmers have been deliberately vague on whether this position might shift.
Roundtable discussions pointed towards intergenerational equity as a key theme. With Millennials now slightly outnumbering Baby Boomers, the political balance may be changing. Younger Australians are looking for relief, but without tackling sensitive areas such as the GST or the tax treatment of the family home, the only options are:
Tax Concessions on the Radar
Between now and the next Federal election, expect growing advocacy from civil society groups pushing to reduce or eliminate concessions that largely benefit higher-income earners. Likely targets include:
There may also be social security reforms impacting older Australians, such as changes to deeming rates for pension eligibility or revisiting how the family home is assessed.
Business Investment and Corporate Tax Proposals
The government is also exploring investment incentives to stimulate business growth. Options include:
Meanwhile, the Productivity Commission’s proposal to lower the corporate tax rate to 20% for businesses under $1 billion turnover faces challenges. Its design, paired with a 5% cashflow tax and removal of interest deductions, could have major financing implications, particularly as most businesses are net borrowers.
Additionally, under Australia’s dividend imputation system, resident shareholders would face more top-up tax, meaning the reform may simply shift tax revenue from companies to individuals.
What to Watch Before the Next Election
While the government remains cautious, political momentum and demographic shifts may push it towards tax reform. Expect ongoing debate around:
For now, the message is clear: no major tax surprises yet, but change could be on the horizon as the next Federal election approaches.
