Economic Reform Roundtable
The Tax Institute welcomes the opportunity to make a submission to the Treasury in respect of its consultation regarding the upcoming Economic Reform Roundtable (Roundtable).
Due to the crucial role the tax system has to play in the Australian economy, any economic reform agenda should incorporate tax reform as a top priority. A well-designed tax system enhances efficiency, fairness, and growth. Inefficiencies and inequities in the tax system can restrict investment, limit productivity and stifle economic output.
Australia’s tax system is ripe for reform that could generate substantial social and economic benefits for Australian businesses and the community.
To assist the Government in progressing tax reform, The Tax Institute has published, among other materials, the following key products:
- the Case for Change, our 2021 landmark discussion paper, considers the Australian tax system holistically. It identifies the aspects of the system that are performing well, and those that are lacking, proposing a range of options for reform which remain relevant today. The Case for Change aims to inform policy discussions and drive meaningful changes in Australia’s tax framework to bolster business growth and economic resilience;
- Incoming Government Brief: June 2025, which, following the federal election on 3 May 2025, details key tax and superannuation measures announced by previous governments that remain unenacted ahead of the commencement of the 48th Parliament, and certain other aspects of the system in dire need of reform; and
- our recent submission to the Productivity Commission in response to its consultation on Pillar 1: Creating a More Dynamic and Resilient Economy, which outlines the crucial role of the tax system in shaping the Australian business landscape and key changes that can be made to foster investment and productivity growth.
For the purposes of the Roundtable, we have summarised below some of our key reform ideas (that were not included in our recent submission to the Productivity Commission):
- establish an independent tax policy and reform commission to undertake a comprehensive review of the Australian tax system at the state and federal levels and to manage a process of tax reform, including the development of underlying tax policy, and ongoing maintenance of the tax system;
- review the personal marginal tax rate system including the various levies and offsets and address bracket creep whether by indexing personal income tax thresholds in line with inflation or otherwise further adjusting the various brackets to alleviate pressure on individuals;
- review the childcare subsidy for all families and the current hourly rate cap to better reflect the current costs of living and raising a family. Additionally, reviewing the eligibility criteria, such as the hourly Activity Test, to determine if they are an impediment for parents’ participating in the workforce;
- reforming the existing capital gains tax (CGT) discount so that eligibility for any discount is based on a scaling rate that increases the longer a taxpayer holds a CGT asset, is more reflective of actual rates of inflation in Australia, and better addresses concerns about market distortions from having overly generous tax arrangements for certain investments compared to others;
- simplifying the taxation of trusts to reduce complexity and to ensure tax neutrality in respect to the choice of entity for operating a business;
- a thorough review of the GST regime, considering options to increase the rate by at least 2.5% from 10% to 12.5% with a view to future incremental increases to align more closely with the OECD average and/or broaden its base, to include certain goods and services currently exempt or otherwise GST-free, at a minimum at a lower rate, or at a single rate as suggested above. It is crucial that this should form part of a package of reforms to income taxes and the transfer system aimed at reducing the dependency in Australia on personal and corporate income tax, and ensuring lower-income Australians are not disproportionately affected;
- increase the turnover threshold requiring businesses to register for GST (for example, to $150,000 per annum) and index the threshold in line with inflation so GST compliance is not a disproportionate impediment to starting or growing a small business;
- reform and simplify the superannuation system by rationalising the myriad caps, thresholds, and indexation measures so they are more consistent and simpler;
- review the generosity of investment concessions, such as the CGT discount (refer above), as well as negative gearing, and superannuation concessions, and ensure any changes are fair to current investors and superannuants. A grandfathering and phase-in approach should be adopted, to protect those who have made investment decisions based on the laws and regulations in place at the time;
- harmonise the definition of ‘employee’ across Federal legislation and work with the States/Territories to achieve the same to provide businesses (including those that operate across jurisdictions) greater clarity of their obligations. Noting that the meaning of ‘employee’ varies across various aspects of the federal tax laws, including PAYG, FBT, superannuation guarantee, and fair work purposes, in addition to payroll tax purposes, a harmonised definition would help to reduce red tape, improve compliance, and simplify the rules for employees, contractors and businesses.
As requested, the above is only a brief overview of some of our reform ideas. We would be pleased to discuss any of these ideas further, including their practical implementation, and look forward to continuing to constructively engage with the Government on tax reform.