Tax reform in Australia: What citizens are fighting for

Australia’s tax system is a topic of intense debate, with numerous calls for reform to address its complexity, inefficiencies, and inequalities. As citizens become more aware of tax policy’s impact on their daily lives, many are demanding change.

Learn more about this significant issue and how Australians are using Change.org to push for a fairer and more effective tax system.

Australia’s tax reform issue

According to the Organisation for Economic Co-operation and Development (OECD), Australia’s 10% Goods and Services Tax (GST) is well below the average of 19.5% in other countries, and the heavy income tax dependence creates an unsustainable burden on workers. Meanwhile, capital gains and wealth taxes remain significantly underutilised, exacerbating wealth inequality and putting additional strain on middle-income earners.

The Henry Tax Review recommended various reforms, including the potential replacement of the GST with a business cash flow tax to address these inefficiencies. With pressing issues like housing affordability, ageing populations, and climate change; citizens, advocacy groups, and experts rally behind the call for a tax system that better serves the public.

Major areas where citizens want tax reform

Tax reform is on the national agenda, driven by systemic issues such as inequality and inefficiencies in the Australian economy. Citizens and experts alike have voiced concerns about several key areas where reform is urgently needed:

• Inequality: Australia’s tax system disproportionately affects low- and middle-income earners with high individual income tax rates and insufficient wealth taxes. Additionally, superannuation tax breaks benefit the wealthy disproportionately, exacerbating wealth inequality.
• Inefficiency: Complicated tax policies, such as stamp duty and payroll taxes, make buying property or hiring employees more burdensome, leading to slower economic growth.
• Outdated policies: The tax system still gives preferential treatment to wealth generated through assets rather than labour, discouraging productivity and entrepreneurship.

Organisations like the Grattan Institute and CPA Australia are leading the charge in calling for systemic reform. Still, it’s the voice of citizens that will ultimately shape the future of tax policy in Australia. A comprehensive review of the tax and transfer system is essential to address these challenges and ensure a fairer and more sustainable economic future.

Capital Gains Tax

One of the most controversial elements of Australia’s tax system is the capital gains tax (CGT). CGT allows property investors to be taxed on only 50% of their capital gains when they sell an investment property. This tax break encourages speculative investment, increasing housing prices and wealth inequality. Critics argue that CGT disproportionately benefits wealthy property investors as housing becomes more unaffordable for first-time buyers.

The OECD and Intergenerational Report 2023 have both highlighted CGT as a necessary reform area. Reforming CGT could reduce speculative investments in housing, making property more accessible for younger generations. 

Proposed reforms include reducing the CGT discount or limiting tax deductions on property-related expenses like negative gearing, which is estimated to save the federal budget around $5 billion annually. Additionally, certain tax exemptions, such as those related to capital gains tax, disproportionately benefit wealthier households while distorting the housing market.

Public sentiment around CGT reform has been mixed. While many Australians support making housing more affordable, others — particularly those who already own property — oppose changes that could devalue their investments. However, with growing concerns over wealth inequality, the call for CGT reform is gaining traction.

The cent tax rate

Australia’s individual income tax rates are complex, with multiple tax brackets and rates that vary based on income level. Additionally, businesses are taxed at different rates depending on their size, adding further complexity to the system. The cent tax rate structure makes the system difficult for individuals and companies to navigate.

Low-income earners bear the brunt of these complexities, while high-income earners often benefit from tax loopholes and deductions. The Medicare levy further complicates the tax system, mainly affecting low-income earners due to changes in the low-income thresholds. 

Stage 3 tax cuts, which took effect in July 2024, aim to reduce the tax rate for those earning between A$18,201 and A$45,000 from 19% to 16%. While this will offer some relief, experts argue that these changes do little to address the system’s broader issues of fairness and simplicity.

Critics of the current tax structure, including Elinor Kasapidis from CPA Australia, argue that the tax burden needs to be shifted away from personal income taxes. Broader tax reform, including reducing the cent tax rate for businesses and simplifying individual tax brackets, could reduce the tax burden on low- and middle-income Australians.

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Actions to reform the tax system

The Australian Treasury‘s latest Intergenerational Report highlighted the growing pressures on the tax system. Among them include fewer taxpayers supporting an ageing population and declining revenue from traditional sources like fuel and tobacco excise. The OECD has recommended significant changes, such as increasing the GST and shifting the tax burden from labour to wealth and consumption. 

Additionally, transitioning from stamp duty to universal land taxes could provide a more equitable, stable, and efficient tax system. These changes would align Australia with international tax standards and provide a more sustainable revenue base. However, political roadblocks have slowed the pace of reform. 

Tax reform campaigns on Change.org

While government initiatives and expert recommendations are crucial, citizens increasingly use platforms like Change.org to push for tax reform. Australians from all walks of life are launching petitions to address tax issues directly affecting them, from HECS debt to taxes on everyday expenses. 

Make gym, Pilates, Yoga, Tai Chi and supervised personal training tax-deductible

This campaign advocates making wellness services like gym memberships and workout classes tax-deductible. The petition argues that tax relief for these services would promote healthier lifestyles and reduce the long-term burden on the healthcare system.

Reforming HECS debt

Many young Australians need help paying off their HECS loans. One successful petition called for changes to how HECS debt is indexed, particularly as the burden of student debt grows with rising inflation. 

Stage 3 tax cuts 

The Australian Government adjusted the Stage 3 tax cuts after a campaign called for the Stage 3 tax cuts to be abandoned due to their overwhelming benefit to the wealthiest Australians and the potential to increase inequality, arguing that Australia cannot afford to prioritise the wealthy while so many others struggle to make ends meet.

Your Voice Can Influence Tax Reform

While the Australian Government has taken some steps toward reform, your voice is essential in shaping the future of tax policy. Change.org offers a powerful way to advocate for changes that can benefit all Australians.

Whether you’re passionate about housing affordability, HECS debt reform, or creating a fairer tax system, your involvement can make a difference by starting or supporting a campaign today.