In a significant push for tax reform, Independent MP Kate Chaney and esteemed economist Richard Holden have proposed an overhaul of Australia’s Goods and Services Tax (GST) that could reshape the country’s fiscal landscape.
The proposed changes would see the GST rate increase from 10% to 15%, while simultaneously removing exemptions for goods and services such as fresh food, private education, and healthcare. To counterbalance the impact on everyday Australians, particularly low-income earners, the plan includes a universal $3300 “basics rebate” for every adult, effectively shielding the first $22,000 of consumption from GST.
A Win for Low-Income Earners?
Chaney and Holden argue that this measure would leave 60% of Australians financially better off, even with the broader tax base and higher rate. Their modelling suggests that this approach could also generate an additional $23.8 billion in government revenue by the 2026–27 financial year.
“Our current tax system unfairly burdens younger generations who will be responsible for funding an ageing population and rising structural deficits,” Chaney said. “We need brave conversations about revenue sources to prevent passing the problem down to future generations.”
Global Perspective on Consumption Tax
Australia’s reliance on income tax over consumption tax is unusually high compared to other developed economies. OECD data shows that countries like New Zealand, Denmark, and France collect a much larger share of tax revenue from consumption, indicating untapped potential for Australia to balance its revenue sources more efficiently.
“Compared to other countries, we collect half as much from GST and twice as much from income taxes,” Holden noted. “That’s inefficient and counterproductive. It stifles productivity and innovation while exacerbating intergenerational inequality.”
Government Reaction and Political Climate
Despite the economic merits outlined by Chaney and Holden, Treasurer Jim Chalmers has expressed caution, while Prime Minister Anthony Albanese has firmly dismissed the idea of raising the GST. However, economists believe the upcoming August 19 Productivity Roundtable could provide a timely platform for revisiting bold ideas like this.
“This moment offers a rare opportunity for genuine policy innovation,” Holden said. “The roundtable could be the breakthrough point.”
Meanwhile, Senator Bridget McKenzie of the Nationals has urged the Albanese government to act decisively on tax reform, stating, “This is a once-in-a-generation opportunity. With a strong parliamentary majority, this government must be bold, even if it challenges its traditional base.”
Stay updated with the latest news, innovations, and economic insights at Inspirepreneur Magazine.
