Younger generations are facing mounting tax inequities, prompting the federal government to weigh changes to long-standing tax concessions. Treasurer Jim Chalmers says a fairer system may mean scaling back benefits on retirement savings and investment income.
A sweeping review of Australia’s tax system is back on the table following a high-level productivity summit. Amid growing concerns over intergenerational inequality, the government is considering options that could affect how retirement income is taxed.
The issue has drawn renewed attention after Chalmers acknowledged “troubling imperfections” in the current system, which favours older Australians through untaxed superannuation earnings and withdrawals. With $4.1 trillion saved in super accounts, potential reform could have widespread economic implications.
Focus On Intergenerational Equity
The federal government has begun to address structural imbalances in Australia’s tax system that critics say leave younger taxpayers at a disadvantage. Treasurer Jim Chalmers, speaking after a productivity roundtable in Canberra, said the system needed “modernising” to ensure a fairer distribution of the tax burden across age groups.
At the centre of the discussion is Australia’s superannuation framework, which holds over $4.1 trillion in savings. According to the Australian Financial Review, these funds currently benefit from over $50 billion in annual tax concessions, particularly on employer contributions and investment earnings.
Retirees over the age of 60 can withdraw earnings tax-free, even while drawing six-figure annual incomes. Aruna Sathanapally, chief executive of the Grattan Institute, described this as a key driver of inequality, noting at the summit that a retired household earning $100,000 per year may pay less than half the tax of a working household on the same income.
According to Sathanapally, the imbalance extends to how investment income, trusts, and housing are taxed, leading to further distortion. She called on political leaders to compromise and deliver reforms that address these disparities.
While Chalmers has not outlined a specific reform path, commentary from the Australian Financial Review suggests that superannuation concessions are now seen as a more likely target than changes to the GST, due to limited political appetite for consumption tax increases.
Political Caution Ahead of Broader Reform
Despite the urgency expressed by some economists, major tax reform appears unlikely to occur before the next federal election. Prime Minister Anthony Albanese has ruled out any near-term overhaul, citing a lack of electoral mandate. According to statements from senior ministers, any significant policy shifts will be presented to voters in 2028.
Chalmers echoed this stance, suggesting changes will require extensive consultation and cabinet-level discussions. Wayne Swan, Labor national president, reaffirmed that “big, substantial changes” would need public backing before implementation.
While income tax cuts have been floated as a potential measure, they would likely be funded by scaling back concessions elsewhere—most notably in superannuation and investment tax breaks. The Productivity Roundtable did not produce immediate policy outcomes, but experts agree the momentum for reform has now been clearly established.
