As you may be aware, the Treasurer addressed tax reform during the National Press Club event on Wednesday. Labor made several commitments before the election, but the question remains—where will the funding come from? They are now considering tax reform. Although the Treasurer stated he is not currently inclined to raise the GST, it remains on the table as an option. Are we expecting to pay more tax in the near future?
Labor Open to New Ideas on Tax Reform
nned2say on 19/06/2025 - 12:37
Comments
I knew this would happen, but I didn’t expect it to happen so soon.
Which free handouts?
Covid payments, energy payment, school bonus… the list goes on!
Sometimes it's good to read statistics on the topic to get the true picture of what is actually happening.
https://www.ato.gov.au/about-ato/research-and-statistics/in-…
Chart 1
The number of individuals lodging tax returns has increased a bit
The number of companies lodging tax returns has increased alotThis means there are way more companies operating in australia
Chart 2
Tax revenue from individuals has increased by $70 billion over 5 years
Tax revenue from companies has increased by $40 billion over 5 yearsA bit odd because the growth in the number of companies was way more
Don't want to go into every chart. But here is an idea for reform.
Introduce a revenue tax on companies.
What they do is claim expenses and only pay tax on what is left.
Individuals get taxed on their full income.
Why shouldn't companies.
Because many of the largest tax paying companies will just relocate if the net effect is too much of a hit to profit growth growth growth.
Well no this is incorrect thinking.
Because Profit is Profit.
Profit is the amount they have left over to enjoy after all expenses are paid for.
Companies will only leave when they believe that the risk is not worth the profit.
For example:
If they have to invest $100 billion to start a business but forecast that their profit will only be $1 million risk / reward is low.
They are two completely separate things.
There are some industries where businesses make a profit of 1% and they think its worth.
There are some industries where businesses make a profit of 50% and they DO not think its worth it.
That's because income tax is around double the amount compared to company tax so the $$ increase will be more even if the % increase is less.
Well no because in 22-23
Total wages paid to Australians was around $1.2 trillion
Total revenue earnt by businesses was $7.4 trillionThe reason there is a gap is because people are taxed on income but businesses are taxed on profit which is income minus all expenses. If businesses were also taxed on income it would be like for like.
Individuals are also taxed on income minus all expenses.
@donga100: No they are not. Just one example of an expense:
An individual cannot claim motor vehicle expenses from their primary location of residence to the place they will go to earn income.
A business can claim motor vehicle expenses from their primary location of residence to the place they will go to earn income.
Except businesses pay for the land, labour and capital and all the other expenses required to have those employees just so they get the opportunity to earn that income.
The individual has very insignificant costs compared to those of the business and the individual contributes significantly less to society than an individual does.
Remember the money the individual gets to pay their share of the tax actually comes from the revenue collected by the business.
If we didn't have businesses, how would an individual even get a job to begin with?
Not only do businesses have to provide employment, they also have to employ a whole bunch of extra people to do the same job when the primary employee doesn't do it.
Thus they get to pay double wages and all the associated costs to employ the primary employees who already cost a business more than the wages actually given to the individual.
Tax reform is great if implemented well.
Shut down loopholes to start with.
loopholes such as?
If you really don't know, you can't possibly participate. It would mean you've been living under a rock.
I am open to discuss but if you're not then that's fine.
@Jaduqimon: Google the biggest corporateand multinational tax avoiders in Straya, who gets to rake in millions of dollars PA rebates etc, and get back to me.
Loan payments to foreign owned subsidiaries to minimize company profits at tax time
what are loan payments? you mean interest payments for borrowings from overseas subsidiaries?
@TheBilly: why is that a loophole? as long as the interest paid and the debt/equity level is arm's length which is covered under the transfer pricing legislation and thin cap, there is no loophole.
what do you suggest? the local entity doesn't use debt at all in its business? pure equity funded?
@Jaduqimon: Because there are two types of entities in question here - companies vs individuals and they are treated differently under the system. So it is a loophole, something available to one entity but not the other. I suggest a tax on revenue and a more simplified taxation system, not on profit.
@TheBilly: individuals can also claim interest deductions though if the purpose of the loan is for business or income generating activity?
@Jaduqimon: Yes I'm aware, there is concepts like debt recycling. But the company is still being taxed on income minus expenses whereby the individual is being taxed on income and has very littel expenses to claim.
Likewise the individual has to get a loan from a company and the company has to get a loan from a company. Why cant I just call my cousin in Brazil and get him to write up a loan for me as an individual - it won't pass the test. So to be entitled to the same arrangement that companies undertake to minimize their taxes, I have to jump through the same hoops as the corporation to get that entitlement. But they are a corporation and im an individual. Loop hole.
@TheBilly: i dont understand what you're trying to say.
As an individual, if i go take out a loan and use the proceeds to produce income, then the interest is deductible just like a corporation.
your brazil cousin example does work foran individual. if you can get him to actually loan you some money and have a legalised loan agreement, and use the proceeds for income producing purposes then yes, its deductible.
if you think companies don't need to jump through hoops then you can "easily" create a company and do the same.
@TheBilly: Also we do tax on revenue… its called income tax not profit tax.
We tax revenue and give deductions on expenses. thats how it works. or are you suggesting we tax revenue but not give deductions to expenses at all?
@Jaduqimon: Yes - or make the claimable deductions the same for all individuals and corporations
For example: a vehicle
I cannot claim my vehicle costs to get to work, but a corporation can claim vehicle costs to undertake business
We are both in the process of generating income
or are you suggesting we tax revenue but not give deductions to expenses at all?
@TheBilly: getting to work is not doing work. you job doesn't pay you for the time you spend travelling to work.
However, if during work, they tell you to go somewhere as part of your work, then you can claim the cost of the travel. As you are paid for that time by your job also.
@Jaduqimon: Yes I’m aware.
But a corporation can claim the cost of travelling to the location they will earn income. But the individual cannot claim that same cost of travelling to the location to earn income.
@TheBilly: Want the claimable deductions to be the same for individuals and businesses?
Let the individual pay their own super, sick leave, maternity leave, worker's comp and every other benefit they receive at the expense of the business/employer.
While we're at it, let the individual work out their own PAYG and organise its disbursement to the ATO and reduce the employer's accounting costs.
Want the same benefits as a business structure? Step up and assume the same risk factors encountered by business owners.
@Muppet Detector: Yes why not?
Do the math's, people will happily accept that arrangement because you'll be way in front.
Have the same claimable deductions and tax rates that a business is subject too? Are you kidding?
About the only people who would reject it are the first 2 tax brackets.
Anyone above that, it is worthwhile.
But it has to be like for like.
So a business can claim the electricity bill on their office, you claim the electricity bill on your house.
Like for like in everything.
So a business can claim the electricity bill on their office, you claim the electricity bill on your house.
Like for like in everything.
The difference is the electricity bill for the office is an expense related to generating income (or in the case of the company, profit as they don't get taxed on income).
But for an individual their home electricity bill is not usually, and not entirely used directly toward income generating activities.
Although one might argue that keeping yourself alive and happy directly enables you to earn an income that can be taxed. If one were to argue this, one might come up with an analogy comparing maintenance and fuel for a company vehicle with electricity/housing/food for an individual.
@TheBilly: If you use your house to generate income, you are already allowed to claim that as a deduction.
@TheBilly: A corporation has to buy that vehicle so the individual can earn their income.
If the individual pays for the vehicle, storage and costs of it which they use to do business/generate income/do the job they are paid to do, they are already allowed to claim a tax deduction and could probably even store it at the business if they wanted to.
@Jaduqimon: Its not the interest per say that is the issue, claiming deductions is perfectly fine, if you borrow money to start a business that should be deductible, its that these companies typically lend themselves money at above market rates. Then there are other deductibles like licencing. So the Australian entity licenses the name at huge cost. Its just transferring profit to lower taxed regions.
@tomfool: As I said, the interest rate should be at arm's length, i.e. an independent party would also have agreed to the interest rate being charged. If its not then it is dealt with under the transfer pricing legislations Div815. there is no loophole. it is simply against the law to do that.
The same goes for licences. the royalties paid needs to be again, at an arm's length rate so that independent 3rd parties would have agreed to it. these aren't loopholes. Under our tax law we pretty much have closed all the loopholes and also have a catch-all legislative piece under Part4A which basically says if the scheme an entity is running is for the dominant purpose of obtaining a tax benefit, then the tax benefit can be denied by the ATO.
the problem is administering these laws. the ATO simply doesn't have enough resources to go after those that break or tread near the line. And even when they do, it is a drawn out process involving lawyer's and going to court which takes 10+ year. So no amount of political reform can "Close" these loopholes. its not a legislation issue but a resourcing of the ATO issue.
Because there are two types of entities in question here - companies vs individuals and they are treated differently under the system.
They are treated differently because they are two different entities with different types of roles and obligations.
FTR, no barriers to any individual who wants to step up and assume some of the responsibilities and obligations of a business.
@Muppet Detector: Umm there actually is.
As an individual if you want to operate under a Pty Ltd - there are personal services income rules
@TheBilly: 4 types of business structures starting with sole trader.
Want a private company? Follow the rules to qualify. No one is exempt.
Use ChatGPT if you want a summary.
https://chatgpt.com/share/6854cf80-5ce8-8004-a607-e0ad7cf138…This one does a good job. I know you want to be lazy and pretend they don't exist, but there's plenty. Stop being a simp for companies that don't pay tax and actually start being critical of them.
Tax reform is great if implemented well.
For example?
Perhaps they should focus on reducing spending instead of increasing taxes.
yes end the NDIS rort
No end the AUKUS rort first.
100%. Then you've got the money wasted on politicians "expenses".
How about both
We can attempt to end NDIS rort, but we can't end the NDIS. That horse has bolted.
I don't have a problem with the NDIS itself. I have a problem with the rorting from NDIS corporations, and the absolutely insane amounts of money they assign to some peoples plans. Over $1m for a single persons plan is insane.
@brendanm: Far more people than that rorting the NDIS system and using it in ways it is not intended.
A significant "rort" of NDIS funding is how it is actually assessed, distributed and monitored.
Plenty of people misappropriating the NDIS funding from the people given it (some of which is just misunderstanding of what they can use the funds for, so not intentional in all circumstances) to the people assessing eligibility and reporting to every single level of those who access the funding.
There is not one single area of the NDIS where the funding is not being used, accessed or distributed in the way it is intended and legislated.
The NDIS corporations (whatever they are?) are merely the tip of the iceberg.
Saving doesn't generate revenue though. Responsible spending is important, revenue generation just as important.
No mention of a mining tax though, surprise surprise.
You don't need to generate more revenue if you cut spending. They will never tax mining probably because they are weak. The stuff they dig out of the ground is owned by all Australians, the country should benefit from it as a whole, we only get to dig it up once.
You can't cut spending with inflation in the mix. You can generate revenue and invest it to generate further revenue so that you're buffered from spending.
You dig it up with your shovel and tell us where you would dig.
Ballarat isn’t as profitable as it once was idiot.@[Deactivated]: Damn, this is the best our school system can provide ☹️. Do you have a carer around that could type out whatever it is you are trying to say?
@brendanm: Whilst we've got taxation under the microscope, perhaps we should put education into the mix too.
Such a shit argument. Reducing spending isn't going to solve anything. If anything, they need to be spending more to start planning future change.
People are so short-sighted. Save a $1 now but lose $100 in 10 years.
Reducing spending means we don't need as much coming in. I'm not talking about reducing spending on everything, but reducing stuff that is easily reduced, spend more on education and health.
Even if we just stop finding ways to give away more money than we've already committed to for a while would probably help a fair bit.
We are already failing at the things we have already agreed to pay for, but we seem to keep thinking that we should just keep finding extra ways to spend and commit our money.
We've already reassigned the responsibility of retirement income to the employer….
Follow the UK and apply GST to Private Schools
Tax religion, scrap their tax avoidance/reduction perks. Let users pay.
The genuine small % charity arm is a bottomless trough, that they rort from, for the entire brainwashing organisation.remove the ability for private schools to avoid land taxes and council rates
Tick
Let's just remove private schools…
Oh wait, who is going to educate all these extra kids now relying on government spending and infrastructure?
Gov can't educate the kids in govt schooling as it is so let's make sure they have to provide an education to every kid. /s
@Muppet Detector: The shift to private schooling is a self fulfilling prophecy.
If funding, training resources etc were ramped up on public schools, incentives dumped into getting teachers resources and kids back to public schools we could drive down the private school percentages.
I’m sure with some clever funding shifts appropriately timed, and legislative barriers to starting new private schools anywhere we could shrink it down until we could have a single funded system.
Of course that’s just dream world and doesn’t live in any form of federalist Australia reality.
@boirganz: Have you ever wondered why every successive govt specifically encourages private entities in areas such as education, health and housing?
Just three of the areas our govt is legally required to provide but they continue to find new ways to encourage these private entities to stay in business.
There is not one of those areas where our govt is able to provide for every person.
In every one of those areas, the govt is only able to sort of meet its legal obligations by augmenting with stakeholders in the private sector.
Govt even had to privatise the provision of a mail delivery system (another of their legal obligations), they can't even afford to do that.
@boirganz: Where is all this extra funding even coming from? They can't fund the kids they have in the public system far less expecting that they could fund the education of everyone.
Sure, provide more funding. But from where is this funding going to come?
@Muppet Detector: If you were solely focused on the schools that perform the best at the final exams and for entrance into uni, NSW public schools hold most of the top spots.
Only 3 of the top 10 are non gov high schools
@MrThing: They don't even have to perform the best.
They simply cannot provide an equal and just education for the children forced to rely on that system.
There are public schools in Australia that have dirt floors in their classrooms and access to an English speaking teacher for 1/2 a day a week.
Interestingly, their performance is judged by NAPLAN etc the same way as every other kid in the country.
I taught kids who could speak 5 languages, but because one of them wasn't English, that NAPLAN system insinuates that they are dumb.
There are schools in Australia whose security system is a bunch of boganvillea around the perimeter of the school.
We don't even provide access to high school for every child who finishes primary school.
People don't access private schooling because they expect better academic results.
I wonder how the quality of education would change if private schools were abolished and the govt was obligated to provide suitable education to every kid?
Not to say public schools are bad, but private schools offer more discipline and pastoral care - something public schools struggle to replicate.
@MrThing: Exactly. And some would be happy to pay for that because it's not available elsewhere. I personally don't have kids yet but I'm budgeting for it.
@niknikniknik: The govt can't even teach the kids it does have how to read and write.
Their transfer of mathematical skills and abilities is even worse.
If too many kids can't grasp a mathematical concept, we just dumb down the curriculum or remove the concept from the curriculum completely.
Then there is their failure to provide classrooms and relevant infrastructure for the kids they already have, far less their ongoing maintenance of those structures.
Govt doesn't have land (or money) to build enough houses. From where do you think they're going to get money to buy all the land and provide all the infrastructure needed to provide an education for every kid if the ones in private exited the private system.
I guess a lot of it comes down to what sort of education you want for your kid and what your definition of education even is, I suppose.
If the public system meets your expectations, then that is fantastic.
@niknikniknik: Budget instead for one parent to stay home with the kids for the first few years of their life. Its the single biggest contributer to their later academic, social and mental success.
@MrThing: How many private schools in Australia cost $30,000 per year for every student they have enrolled?
Actually, I'm curious about how many private schools cost $30,000 per annum.
Or did you mean for a student's entire education? (Apologies if you did. I can see where an entire private school education may cost $30,000).
Raise the GST, reduce income tax
quickest and easiest to implement without a dozen million dollar consulting reports and more staff to facilitate
Australia has one of the lowest GST rates in the world and is far below the OECD average of 19.2% Treasury Data
Kill AUKUS (although that's not relevant to tax policy)
Massively scale back the NDIS (also not tax policy, but one day we have to wake up and realise……..gee this is out of control)And maybe one day, far far in the future, we can have a discussion about NG and CGT without it being a huge stop the clock election losing move, but I dare say that wont occur until all the boomers are 6ft under
100% with you on the raise GST and lower income tax.
i'm for it but GST is a regressive tax and will make income less equitable
Tax reform is just a pollie's speak for new and increased taxes because we are broke
2008
https://en.wikipedia.org/wiki/Henry_Tax_Review
The report made 138 recommendations.
Rudd endorsed and implemented only 3.
Tax reform goes nowhere in this country.
And anyone coming into an election with reforming tax policy doesn't get a sniff. See: Hewson, Shorten.
Earnings on super which is in retirement phase - subject to the transfer balance cap - is currently not taxed. Why? And I ask this as someone who is not that far off retirement… withdrawals can remain tax free as tax was paid on the original contribution, either by the fund or via income tax, but the earnings within the fund could be taxed at the same 15% as they were pre retirement phase. 15% is still lower than the tax paid on earnings outside of super.
Say for instance you were retiring July 1 with the TBC of $2,000,000 which earned an average of $100,000pa. Under the current legislation that $100,000 is not taxed. But under this proposal, tax on those earnings at 15% = $15000. If you moved that $2m out of super and earned the same 5% then your tax on $100k is going to be a lot higher, so it's unlikely there'd be a max exodus from super funds.
Would be interesting to have access to data re total balances of super currently in retirement phase, and work out roughly what the tax take could be.the people for whom this change makes a significant difference wouldn't be moving it out to individual names, it'd be going to a family trust with individual and bucket company beneficiaries..
Would love it if we could file a joint return as a family instead of individually.
The system uses combined household income as a cut off for things, but individual income for tax. This is what I always wanted since two people earning $50k take home more than one person earning $100k ( $86,924 vs $77,212). Getting access to the other persons tax free and lower tax rates would be nice for single income households or where one person only works part time.
However, with the latest implementation of tax rates and the 30% bracket being so wide, if both people are earning between $45k and $135k a joint return doesn't actually make any difference.
One unintended consequence… if/when the second person ever gets a job, 100% of that income is then effectively taxed at the highest applicable rate, which may well discourage people from entering the workforce.
Not if the system automatically applied the lower of the two choices.
Dual income families usually are split quite inequitably in income so most would benefit from joint returns.
The tax institute did some good work around the current complexity of the tax system and potential options a few years ago with input from a wide range of people in the tax and accounting industry given tax changes have been so haphazard over the last 20 years. It is a long read but covers many interesting areas
https://www.taxinstitute.com.au/content/dam/thetaxinstitute/…
Tax the mining industry, end petrol excise and charge a single road usage tax (with exemptions for sole traders/small businesses), drop income tax, leave the GST where it is. ETA - get rid of the water rights system tax the eff out of foreign entities farming here.
What if your vote was based on your marginal tax rate paid over the last 4 years? Pay top bracket, get 1 vote. Pay no tax (either because you didn't earn anything or were a billionaire hiding money around that place) then your vote is worth 10% of a full vote….
pokes bear, runs and hides….
This is what the scenaro sounds like at an individual level in the real world for the government's approach.
"Hey boss, I can't be bothered making a realistic budget, or living within my means, so I'm going to need you to pay me more out of your own pocket, yeah?"
"Yeah I know I promised not to do this, but now that I tricked you into giving me a new contract I changed my mind"They did it after the last election too, so nobody should be surprised.
Easy, except the need to be re-elected. Remove 50% CGT reduction, and negative gearing, for all future purchases. They are "exceptions to the rule" that skew markets, hardly any other countries do it.
Raising the GST is the most preposterous solution of all. It should be abolished. It is only popular due to relative simplicity and how “invisible” it appears.
But very few people would openly agree the rich and poor alike should be paying the same rate of tax. That’s very much the antithesis of popular opinion. But that’s exactly what GST is. GST is a way to slug the tax on everyone, equally.
In doing so whittling away tax from other sources: income tax weighted against assessable income, or taxes levied on industries/problems that we want to curb (eg: taxing emissions, tobacco, whatever..)
Sadly, Labor has forced themselves into a corner by trying and failing to touch basically any other revenue source.
THIS.
Taxing emissions would be the same it would increase the cost of power across the board and every one would be paying the "same rate", or likely the poor would pay more as they typically do not have the ability to offset costs via solar pv.
Consumption tax implemented with offsets via income tax is a very good way collect tax, the collect increases from wealthy as they tend to consume more.
Taxing emissions however achieves a secondary purpose; to reduce emissions. It targets the tax to achieve a desired public benefit.
Taxing goods and services however doesn’t achieve any purpose.
Ideally, taxes should be levied on things we want to reduce. Kills two birds with one stone.
How do you think the labour government is going to fund all the free handouts???