Personal tax Tax reform

Debate over tax cuts “pointless” without seeing the big picture

SYDNEY, 1 September 2022: While debate rages over the Stage 3 tax cuts and as the Jobs Summit commences, politicians and policymakers are in danger of losing sight of the big picture – a broken and unsustainable tax system.

The Tax Institute’s General Manager, Tax Policy and Advocacy, Scott Treatt, CTA, said: ‘Debating tax cuts or similar issues is pointless until we acknowledge that our tax system is broken. Until we commit to addressing the broader implications of our tax policy, we won’t make any true impact on the lives of working Australians or the health of our economy.’

‘Regardless of who you think “wins” or “loses” with these measures in the short-term, the fact is, we all lose out on the chance to develop a tax system that functions fairly and with our collective best interests as a priority. Now is the time for holistic, systemic review – otherwise, we’re all losers in the long run.’

Stage 3 tax cuts – an inadequate, far away future for taxpayers

The stage 3 tax cuts were legislated in 2018. They are set to come into effect for the 2024/25 income year, and their scrutiny as “tax cuts for the rich” is not new. This is just part of the problem with simply relying on tax cuts instead of a sustainably fair tax system, says Scott.

‘The mere introduction or reversal of tax cuts is not a long-term tax policy. If we had a system that fundamentally functions fairly and efficiently, people at all levels could pay their fair share and see the benefits of doing so. They wouldn’t have to hope for tax cuts to be implemented or temporary tax offsets to be continued for another year.’

‘We need a balanced, considered debate. It’s important we look at the whole system, as it stands today, and consider the whole tax mix, in particular the need to decrease reliance on income taxes. That holistic review includes looking at whether the transfer system is working effectively to deliver equity across taxpayers, as tax cuts alone will never achieve this.’

Finding the funding for affordable childcare

The affordability of childcare is an issue that needs to be addressed sooner rather than later. Childcare is one of the biggest barriers to the participation of secondary income earners (primarily working mothers) and like the rest of the tax system, it is too complex and overcomplicated.

Scott says, ‘Treasurer Jim Chalmers has flagged concerns about the cost of bringing Labor’s childcare plan forward. It’s true that we need to carefully consider the balance of spending, but that’s all the more reason to have a discussion about holistic reform. If we look at the tax system as a whole instead of approaching it as separate, almost unrelated parts, we can find solutions for the cost of childcare and find revenue streams to fund them at the same time.’

The Tax Institute supports the increase in the childcare subsidy, but irrespective of the commencement date there remains a need to go further with a review of the formulas and thresholds to ensure the average secondary income earner isn’t penalised for choosing to return to full time work. Currently, secondary earners working a full-time fortnight on the average income might take home barely enough for a morning coffee on the 10th day.


  • Personal tax
  • Tax reform

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