Australia Tax Reform Urged to Tackle Inequality & Modernize System

Australia's tax system is facing increasing calls for significant reform to address rising inequality and adapt to the challenges of the 21st century. Recent analysis suggests the current system disproportionately favors older, wealthier taxpayers due to preferential tax treatment of wealth and assets.

Specifically, superannuation, capital gains, and negative gearing are under scrutiny. Treasury estimates for 2024-25 highlight the top revenue losses, including billions attributed to concessional taxation of employer superannuation contributions and Capital Gains Tax exemptions on main residences.

Critics argue that wealth creation tools like the Capital Gains Tax discount and superannuation have led to inefficiencies in the housing market and unfair outcomes for retirees with limited assets. For example, a pensioner earning $43,816 annually pays $2,595 in tax, while a retiree with a substantial superannuation balance may pay no tax on similar income.

Proposed reforms include re-evaluating death duties to limit the intergenerational transfer of wealth and broadening the tax base by addressing overly generous concessions. Experts emphasize the need for a comprehensive, consensus-driven approach to ensure fairness across generations and manage financial risks associated with the shrinking tax base.