‘Really high income burden': Calls to slash income taxes

News.com.au

19-06-2025

Australia is being warned to modernise its tax system or risk having a severe problem down the track, with high income taxes being replaced by taxation on consumption.
Australian Treasurer Jim Chalmers used his speech at the National Press Club on Wednesday to flag that the government was looking to make 'bold' reforms beyond its proposal to roll back concessions on ultra-high super accounts.
But when questioned if these 'bold' changes included moving on the GST rate, Mr Chalmers declared he couldn't 'rule in or out' any changes, although he said he was personally against the idea.
CPA Australia chief of policy Elinor Kasapidis told NewsWire while she welcomed the conversation started by Mr Chalmers, she believed Australia should lift the GST.
'It's what you call an indirect tax and it is efficient to collect as it is on consumption,' she said.
'What it also means is putting your money into investments that can grow and develop more profits, generating more income for individuals and businesses as well as helping to drive the economy.
'If you can drive the economy, you increase GDP, your tax take is naturally going to increase and that can help the budget.'
Ms Kasapidis said this should be done in two ways – by broadening the base for the GST as well as lifting the rate.
The GST has been stuck at 10 per cent for 23 years.
The current GST system is complex with a number of exemptions including on including most basic foods, some education courses, some medical health and care products, water services, precious metals, exports, farmland and international mail.
'We have a lot of GST-free goods and exemptions which makes things tricky and complicated and then you need to look at raising the rate,' she said.
'Of course you also have to look at who would be impacted, such as lower income households and pensioners, to make sure they are compensated during the transition.'
BDO tax partner Michael Anderson agrees telling NewsWire Australia needs to reduce its reliance on income taxes by broadening the tax base and working with the states to eliminate ineffective taxes.
'While this involves balancing multiple competing interests, the objective would be to increase the income/profit of individuals and corporates alike, which in turn could be spent on productivity-lifting investment,' Mr Anderson said.
'If individuals choose to spend an increase in after-tax income, it would be recaptured through a broader GST base.'
Ms Kasapidis warned the current tax collection model was inefficient and relied too heavily on income taxes for both individuals and businesses.
'If you look at the OECD statistics it shows we have a really high burden on income tax which means workers and businesses contribute a lot of the base compared to other countries,' she said.
'If you look at other jurisdictions all around the world, they have a flat GST rate.
'So you apply it to everything.
'But what that means of course on the income tax side you might have some changes including tax cuts so that is balanced out.'
CPA Australia stopped short of calling for a specific hike to the GST but instead called for a conversation around a fair rate.
The International Monetary Fund has previously suggested Australia should expand consumption taxes such as the GST to help repair a blowout in the deficit, that's not an idea the Treasurer has backed.
Ms Kasapidis said acting on changing the tax system now, while Australia is in an 'okay economic position' can help avoid shocks of the future.
'What we don't want to get to a point in 20 or even 50 years when we have a crisis and have to make sharp cuts, so let's have this conversation now,' she said.
'If you can get a tax system that is balanced, sustainable and proportionate it will help the government with its revenue planning.
'If you can make it efficient you can unlock productivity and get economic growth so you have that benefit.
Mr Anderson said a number of measures could be implemented including: