Chalmers Tax Reform: Generational Fairness and Treasury Plans

Treasurer Jim Chalmers has signalled a reset of the tax mix focused on intergenerational fairness, investment incentives and a simpler, more sustainable system to fund services for an ageing population. Treasury will develop options that shift pressure off wage earners and examine concessions concentrated among wealthier and older Australians.

Treasury analysis indicates that, without reform, personal income tax will rise by about 2 per cent of GDP over two decades—roughly $60 billion a year in today’s dollars—as bracket creep does more work. At the same time, only 16 per cent of Australians aged 70 and over paid income tax in 2022–23, down from about 30 per cent in the 1990s. These dynamics underpin the government’s focus on who pays—and how.

Chalmers outlined three principles to guide the work: a fair go for working-age people through an intergenerational lens; an affordable, responsible way to lift business investment; and a simpler system that sustainably funds essential services. He has ruled out another long-form review, with Treasury instead preparing targeted options for cabinet consideration.

Among possible changes canvassed at the economic roundtable were tightening superannuation concessions (on top of the already legislated extra 15% earnings tax on balances above $3 million, including unrealised gains), reducing the capital gains tax discount, and clamping down on family trusts. Proponents argue these measures would relieve the income-tax burden on younger workers.

On business taxation, one option under discussion would cut the headline company rate to 20% for firms with turnover under $1 billion, retain 30% for larger companies, and apply a 5% cash-flow tax—creditable and intended to reward investment—across all firms. Business groups cautioned that the package could increase the overall burden on around 500 of the largest companies, potentially weighing on investment, while supporters contend it would better align tax with growth.

A near-term change with broad conceptual support is a road-user charge for electric (and potentially hybrid) vehicles as fuel-excise revenue declines. NSW has a model designed to commence 1 July 2027 or when EVs reach 30% of new sales, whichever comes first, and federal–state treasurers are due to meet in early September to progress a nationally consistent approach.

The politics remain finely balanced. Before the summit, the government said only previously announced measures would proceed this term; Chalmers has since noted that the timing of further changes is a matter for cabinet, with global shifts in multinational tax adding urgency in some areas. Unions favour higher taxation of wealth but warn against broad income-tax cuts that could undermine service quality, while business opposes measures it says would dampen investment.

Former officials have urged a stronger fiscal framework to anchor decisions. Philip Lowe and Ken Henry argued that credible budget rules are needed to ensure any tax changes are matched by spending discipline and to stabilise the structural position over time.

Bottom line: The government is preparing options to rebalance the tax burden away from wages and toward concessions and bases viewed as under-taxed, while testing corporate settings that could lift investment. The scope, sequencing and guardrails will determine whether the package is seen as fair—and whether it supports growth.