1900s
It’s the turn of the century, and Australia is made up of six separate British colonies—New South Wales, Victoria, Queensland, South Australia, Western Australia, and Tasmania – each with its own tax system.
On January 1, 1901 Federation sees the colonies unite to form the Commonwealth of Australia.
Taxes, including income tax, still sit with the states. Several states also have their own, limited version of the old age pension.
1910s
By 1910, as a newly federated nation with roughly 4.5 million residents, Australia is a vast country made up of large land holdings – often leaving arable land underutilised. The government introduces a Federal Land Tax with the intent to break up these large holdings.
“The [land] tax will largely put an end to land monopoly, will check the aggregation of great estates, and enormously facilitate settlement on the land.”
Taxation of unimproved value of land in Australia, H. Heaton, Quarterly journal of economics (1925) p 422
A Commissioner of Land Taxation, with an office as a branch of Treasury, is appointed to administer the legislation. This office, officially formed on 11 November 1910, will operate under several names throughout the years, including the Federal Taxation Office, Commonwealth Taxation Office and finally, the Australian Taxation Office, or as we all know it today, the ATO.
On 4 August, 1914 Australia enters what will become known as World War 1, when Great Britain declares war on Germany.
The Commissioner of Land Taxation becomes the Commissioner for Taxation and a two-tier tax system in which Australians pay income tax at both a state and federal level is created. To minimise the impact of ‘double-taxation’ a ‘tax-free threshold’ is introduced – a core component of our tax system even today, and relatively unique in the global tax landscape.
1920s
A Royal Commission into taxation is appointed in September 1920. It produces five reports, recommendations from which are incorporated into tax legislation. Its major recommendation – that the Commonwealth should have exclusive rights to income taxes and the states should retain other taxes such as estate duties and entertainments taxes – is rejected by both state and federal governments.
1930s
Post-war, Australia borrows heavily to invest in our developing nation. But during the Great Depression of the 1930s, that debt is recalled, kicking off a trend of increasing taxes.
By the end of the decade, the complexity of income tax systems in Australia is one of our biggest challenges. A new Royal Commission on Taxation is established in 1932 to inquire into simplifying and standardising taxation laws across the commonwealth and state governments.
In 1934, members of the Royal Commission and Commissioners of Taxation from the Commonwealth and states held a conference to draft new legislation that would do just that. The 19‑day conference worked through a draft income tax act clause by clause, discussing technical details in depth. The draft legislation that emerged was then reviewed twice more at conferences in 1935.
The result: the Income Tax Assessment Act 1936, a landmark in Australian income tax legislation still in use today.
1940s
On 3 September 1939 Prime Minister Menzies tells Australians that Britain has declared war on Germany and, as a result, Australia is also at war.
By August 1945, when the fighting ends, WW2 will have cost Australia 39,761 lives and £2,132.74 million – more than 10 times the monetary cost of WW1. Given this cost, the tax system and the revenue it raises become a major part of the war effort.
Thus far, the states have declined to hand over all income tax management to the federal government. But under Defence Power, the Federal government plans to take over all income tax management, despite the states objecting in the High Court – where they lost. The Federal Government takes over all income taxation management from the states in 1942, centralising income tax across the nation.
In 1943, new legislation mandates registration of tax agents. Later that year, a group of those tax agents band together to create The Taxation Institute of Australia – now known as The Tax Institute.
1950s
With a newly unified tax system in place, in February 1950, The Commonwealth Committee on Taxation was established to recommend ways to simplify tax laws, remove anomalies and provide an equitable basis for taxation.
The Commission prepared over 30 reports, but one of its most significant recommendations was the adoption of income tax self‑assessment by taxpayers. Despite support from Deputy Commissioners and committees of tax officers from all the branches of the ATO, the proposal was quashed in October 1951. Instead, a system of self‑assessment for provisional income for taxpayers was adopted in 1952.
Land tax is abolished from 1 July 1952 and the legislation built around it is rewritten accordingly, resulting in the Taxation Administration Act 1953.
1960s
In the 60s, social change and anti-war sentiment gives rise to a new, rebellious youth culture. The tax system remains relatively stable during this decade.
The Commonwealth Committee on Taxation, known as the Ligertwood Committee, completed its report in June 1961. Many of its recommendations were implemented in amendments to income tax law in 1963 and 1964.
1970s
In the 70s, the rebellious youth culture of the 60s hits the tax system in the form of the infamous ‘bottom of the harbour’ tax avoidance schemes. Here’s how it works:
You’re the owner of a profitable company. Before your company’s tax liability is due, you withdraw all the profits and assets. The “empty” company that’s left is sold off to an untraceable party, who “lose” or destroy its financial records and let it dissolve.
The ATO comes knocking to collect on your company’s owed tax. But you sold the company so you don’t know anything about that, do you?
It’s a decade of rampant tax avoidance which is hard to detect and even harder to block. This shakes public trust in the fairness of the tax system and leads to the introduction of many anti-avoidance measures.
In the middle of this, the Asprey Committee report is released in 1975, widely considered the first blueprint for holistic, sweeping tax reform in Australia. Even so, it will be a decade before some of its major recommendations are adopted.
1980s
In July 1985, at a national Tax Summit, the government announces a package of tax reforms including a capital gains tax, a fringe benefits tax and increases in company taxation rates, amongst others.
The following year, sees a revolution in the tax system, with the introduction of self‑assessment. This changes Australians’ relationship with the tax system again – now, that trust that had been eroded by the avoidance schemes of the 1970s is a two-way street, as taxpayers are relied upon to meet their tax obligations honestly.
1990s
In 1993, the parliamentary Joint Committee of Public Accounts releases its report, making well over 100 recommendations. Among them: the introduction of a Taxpayers Charter, which became a reality in 1997, and a Taxation Ombudsman, first appointed in 1995.
By 1994, there are 27,000 registered tax agents in Australia. This community of tax professionals is vital to the success of self-assessed taxation – helping to ensure taxpayers understand their obligations and providing feedback to the ATO regarding public rulings.
Also in 1994, a Tax Law Improvement Project set out to simplify income tax law, proposing legislative changes that became law on 1 July 1997 as the Income Tax Assessment Act 1997.
The late 1990s bring a significant change: a whole new tax system. Tax reform, not a new tax, a new tax system, published at the beginning of August 1998, lays out the governments plan to reform our tax system.
This plan includes introducing Australian Business Numbers, quarterly business activity statements, a pay as you go instalment system, the prescribed payment system, provisional tax, company tax instalments and withholding tax and of course, abolishing sales tax in favour of introducing a Goods and Services Tax – the GST.
The Review of Business Taxation, known as the Ralph Review, also releases its report, A Tax System Redesigned on 21 September 1999. Its core recommendations of a 50% CGT discount, lowering company tax rates, improving fairness through entity-level taxation for trusts and various integrity measures are adopted and enacted.
2000s
And as a new millennium dawns, further regulation is implemented. In the 2000s, the Board of Taxation, Inspector‑General of Taxation, the Tax Agent Services Act 2009 and the National Tax Practitioners Board are brought in.
In the midst of this, the 2008 the Global Financial Crisis hits Australia and by the end of June 2009, $7.4 billion has been distributed in stimulus to boost the economy. It’s the largest stimulus package in Australian history – so far.
2010s
In 2010, the landmark Australia's Future Tax System Review, known as the Henry Tax Review, published its report. This review considered the tax system in its entirety, except for three key restrictions. It could not consider:
- increasing the rate or broadening the base of GST
- imposing tax on superannuation payments to retirees over 60 years of age,
- or already-announced personal income tax commitments.
The report makes 138 recommendations – only 3 of which were implemented.
2020s
In March 2020 the COVID-19 pandemic changes life as we know it. With lockdowns in place across Australia and the world, unprecedented support is needed for business, families and individuals. The government introduces a raft of stimulus and relief measures, including JobKeeper, JobMaker, JobSaver, and land tax, payroll and rent relief.
The tax system is primarily how this support is distributed. Ensuring Australian taxpayers understand and access the various schemes is a task that falls to the tax profession.
Overall, Australia delivered $507 billion of support to Australian businesses and taxpayers during the pandemic.
In July 2021, The Tax Institute publishes its landmark report, the Case for Change. This 258-page report lays out options and pathways for tax reform and begins a conversation about what holistic, meaningful tax reform really means.
In 2025, Tax Wars hit shelves, a new book chronicling the political impasse and compromises that stop us from changing for the better and achieving real tax reform. It reignites public conversation around this topic.
And a short while after, in the 2026-27 Federal Budget, the government announces tax reform is on the agenda. The Federal Budget introduces significant change to the tax system – though whether it is truly reform is up for debate.
And today you walked into The Tax Summit – a room full of the people who power our tax system throughout all its changes.
The next step in the history of tax reform? That’s up to you.
Sources
Edmonds, L. Working for all Australians : A brief history of the Australian Taxation Office 1910–2010, Australian Taxation Office (2010)
How did we get here? A brief history of Australia’s tax and transfer system, Parliamentary Budget Office (2024)
Reinhardt, S. Steel, L., A brief history of Australia's tax system, The Treasury (2006)