Treasurer Jim Chalmers has announced plans for extensive changes to Australia’s tax system, with a focus on ‘intergenerational equity’ and ensuring fair treatment for younger employees.
And it could come at a cost for baby boomers.
The proposed reforms include reducing superannuation tax benefits for wealthy retirees, tightening family trust rules, and potentially cutting back on capital gains tax breaks, even though Labor had previously dismissed this change while in Opposition.
The government has already decided to double the tax for superannuation accounts exceeding $3 million and is considering implementing a lower company tax rate for smaller businesses.
In a discussion with Sarah Ferguson on ABC’s 7.30, Chalmers emphasized the need to adjust the system to prevent unfair advantages for older Australians and baby boomers at the detriment of younger generations.
Chalmers told Ms Ferguson, following his three-day economic roundtable, that any future tax reform must address intergenerational fairness.
“A key takeaway from the Economic Reform Roundtable discussions is that tax system reforms should aim for intergenerational fairness,” stated Chalmers.
“We are exploring various methods to enhance the tax system, including reducing taxes for workers, advancing the multinational tax strategy, and implementing road user charges.”
Will baby boomers have to pay more to help out the younger generations?
Treasurer Jim Chalmers during an Economic Reform Roundtable in the Cabinet Room at Parliament House in Canberra on Wednesday
‘There’s an agenda there. But one of the most important areas where there was common ground was that when we reform the tax system, we have to make it fairer to the generations that follow us.’
One move under consideration is to slash income taxes for workers and fund the changes with a crackdown on super tax breaks for rich retirees.
Ferguson asked Chalmers if he was coming for the baby boomers.
‘I wouldn’t put it like that,’ Chalmers said.
‘If you look at the tax changes I’ve made already as Treasurer, that the prime minister’s government has made, they’ve been all about making sure that when it comes to income tax cuts, for example, that those income tax cuts are made available to younger workers and women, people right up and down the income scale.
‘Not just people who are already doing very well. So there’s an intergenerational lens already being applied to those tax changes that we have made.
‘One of the areas where the common ground was most obvious was, if and when we consider next steps in tax reform, we have to care about the intergenerational aspects and the feedback from the group today, from my point of view, is very welcome.’
When asked if the government would consider asking retirees to pay tax on earnings and withdrawals to reduce the capital gains discount, Chalmers was non-committal.
Grattan Institute chief executive Aruna Sathanapally said retirees needed to be taxed more
Baby boomers might not like proposed tax changes
‘We haven’t taken a decision on any of those things,’ he said.
‘When it comes to making superannuation tax concessions, we haven’t taken any decisions to change our policies.’
Labor lost the 2016 and 2019 elections with a plan to halve the 50 per cent capital gains tax discount to 25 per cent, with Anthony Albanese ruling out such changes in Opposition.
But Labor for Housing, a pressure group within the party, wants the 50 per cent capital gains tax discount abolished entirely for investors while the ACTU and the Greens wants the CGT discount restricted to one property.
Superannuation incurs a 15 per cent earnings tax during the working or accumulation phase but it is tax free during the retirement phase when someone turns 60 and stops working.
Chalmers said that a fairer, simpler, and more sustainable tax system was ‘a matter for Cabinet’, with changes possible even without a formal review.
The government also asked Grattan Institute chief executive Aruna Sathanapally to deliver a speech on the tax discussion.
She said retirees needed to be taxed more to relieve the income tax burden on younger workers.
‘Reducing superannuation concessions so the system meets the policy objective of saving for a decent retirement, rather than being a tax shelter; introducing at least a low tax rate on earnings and withdrawals in retirement; reducing the capital gains discount; reforms to family trusts,’ Ms Sathanapally said.
Chalmers said tax reform could go ahead without a formal review.
He said that correcting inequalities between generations was one of the tax system’s most pressing challenges, and promised to ensure it better serves working people and funds essential services.
