As Australia navigates a shifting economic landscape marked by rising living costs, housing pressures, and demographic change, tax reform is emerging as a key policy frontier. The federal government has signalled its intent to modernise the tax system to better reflect contemporary challenges and opportunities. With the 2025 Economic Reform Roundtable approaching, a range of proposals are gaining momentum. Here’s a deeper look at the potential reforms that could reshape how Australians earn, invest, and spend.
Division 296: Superannuation Tax for High-Balance Members
Division 296 tax was due to come into effect from 1 July 2025 however the proposed legislation lapsed when the federal election was called. Division 296 tax is a proposed new tax targeting individuals with superannuation balances exceeding $3 million. Affected members will pay an additional 15% tax on earnings attributable to the portion of their balance above the $3 million threshold. This is on top of the existing 15% concessional tax rate.
What makes Division 296 particularly contentious is its treatment of unrealised gains.
Unlike the traditional capital gains tax, which applies only when assets are sold, Division 296 taxes the increase in asset value even if they remain unsold. This could create liquidity challenges for those with property-heavy portfolios or self-managed super funds. Furthermore, the $3 million threshold is not indexed to inflation, meaning more Australians may be captured by the tax over time as their balances grow.
Supporters argue the reform promotes fairness and sustainability in the superannuation system, ensuring that generous tax concessions are not disproportionately benefiting the wealthiest. Critics, however, warn of unintended consequences, including reduced incentives to save and invest through super.
Stamp Duty Reform
Stamp duty has long been criticised as a distortionary tax that discourages housing mobility. It imposes significant upfront costs on buyers, particularly first-home purchasers and downsizers. Economists and housing advocates are calling for its replacement with a broad-based annual land tax, which would spread the cost over time and encourage more efficient use of housing stock.
While stamp duty is a state-based tax, federal coordination may be necessary to support the transition, especially in harmonising land tax frameworks across jurisdictions.
Digital Services Tax
In an increasingly digital economy, multinational tech giants like Google, Amazon, and Meta generate substantial revenue in Australia while paying relatively little tax. A digital services tax (DST) would target profits derived from Australian users, ensuring these companies contribute fairly to the national revenue base.
The DST aligns with global efforts led by the OECD to modernise international tax rules and prevent base erosion and profit shifting. While implementation would require careful coordination to avoid trade tensions, it represents a step toward greater tax equity in the digital age.
Green Tax Initiatives
Climate policy is increasingly intersecting with tax reform. Proposed green tax measures include:
These reforms aim to shift Australia toward a low-emissions future while generating revenue to fund climate adaptation and innovation.
GST Expansion and Rebate
A bold proposal gaining traction involves increasing the Goods and Services Tax (GST) from 10% to 15% and removing exemptions on essentials like fresh food, education, and health. To offset the regressive impact on low-income households, a universal $3,300 rebate would be introduced.
This reform could raise nearly $24 billion annually, providing a significant boost to government revenue while simplifying the tax base. However, it would require careful design to ensure vulnerable Australians are not disproportionately affected.
Corporate Tax Restructuring
The Productivity Commission has proposed a dual-rate corporate tax system:
This approach aims to stimulate small business growth, improve competitiveness, and reduce inflationary pressures stemming from monopolistic pricing. It also reflects a broader shift toward taxing profits more equitably based on business size and market power.
Personal Income Tax Simplification
Labor’s personal income tax reforms include a proposed standard $1,000 deduction for work-related expenses, reducing the need for complex record-keeping and audits. Additionally, the lowest income tax bracket is set to drop from 16% to 14% by 2027, offering modest relief to low- and middle-income earners.
These changes are designed to streamline compliance, reduce administrative burdens, and make the tax system more accessible for everyday Australians.
What’s Next?
Australia’s tax system is poised for significant transformation. The challenge for policymakers will be balancing equity, simplicity, and economic efficiency while navigating political realities and public sentiment.
Whether these changes ultimately promote a fairer and more sustainable future depends not just on their design, but on how they’re communicated and implemented. One thing is clear: the conversation around tax reform is no longer theoretical—it’s happening now.