Despite decades of recommendations and reviews, Australia’s tax system remains remarkably unreformed since the introduction of the Goods and Services Tax (GST) in 2000. The last major reform before that came in 1985, when the Hawke/Keating government introduced a capital gains tax (CGT), recognising asset growth as a legitimate and necessary target for taxation. But since then, successive governments have shied away from addressing the entrenched inequalities in the system.
In a revealing discussion on Late Night Live, tax expert Professor Chris Evans unpacked the complexities of Australia’s tax landscape, exposing the deep-seated structural inequities that make meaningful reform both politically risky and chronically avoided.
Why Tax Reform Is So Politically Fraught
Tax has long been considered a toxic topic in Australian politics. Professor Evans pointed out several key reasons why tax reform is so elusive:
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Lack of political champions: Unlike the bold reforms under Keating, Howard, or Costello, there’s currently no political figure with the appetite to take on entrenched interests and push comprehensive change.
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Short political cycles: The three-year electoral term is too short to implement and see the benefits of long-term tax reform.
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Voter sensitivity: Tax changes can directly affect voters’ hip pockets, making politicians wary of upsetting their base—especially when it comes to the property-owning middle and upper classes.
A System Built to Reward the Wealthy
Australia’s tax system is stacked with concessions that disproportionately benefit high-income earners and asset holders. Professor Evans argued that while these concessions are often framed as “incentives,” their primary function is to shield wealth rather than foster social or economic utility.
🔑 Key Tax Concessions and Avoidance Strategies in Australia
1. Capital Gains Tax (CGT) Discount
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50% of capital gains are tax-free for assets held over 12 months.
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Over 80% of the benefit goes to the top 10% of income earners.
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Annual cost to revenue: ~$23 billion.
2. Exemption of the Family Home
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The principal place of residence is CGT-exempt, regardless of its value.
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This tax shelter is politically untouchable but costs ~$50 billion/year.
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Other countries cap the tax-free amount or require rollovers into new homes.
3. Superannuation Tax Concessions
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Contributions and earnings within super are taxed at concessional rates.
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Wealthy individuals use strategic planning to exploit caps and maximise benefits.
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Annual revenue cost: ~$50 billion.
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Concessions overwhelmingly favour high-income earners.
4. Negative Gearing
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Allows investors to deduct property losses against other income.
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Works in tandem with CGT discount to generate large tax savings.
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Unique in its generosity compared to most other countries.
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Combined cost with CGT discount: $60–$70 billion/year.
5. No Inheritance Tax
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Australia has no estate duty, no inheritance tax, and no capital gains tax at death.
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Most OECD countries have one or more of these.
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The absence of such taxes facilitates intergenerational wealth transfers untaxed.
6. No Gift Tax
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Wealth can be transferred during life without tax implications, another avenue for avoiding inheritance-style taxation.
7. Use of Discretionary Trusts
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Businesses are commonly operated through trusts to distribute income flexibly among family members and reduce tax.
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Unusual globally; in most countries, trusts are used only for caretaking purposes.
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Enables income splitting and deferral, significantly reducing effective tax rates.
8. Franking Credits
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Shareholders can receive fully franked dividends with refundable tax credits.
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Can result in tax refunds even if no tax was paid—a system nearly unique to Australia.
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Primarily benefits older investors, many of whom pay zero tax but still receive refunds.
A System Skewed Against the Young and the Asset Poor
Professor Evans highlighted the growing intergenerational inequity in the tax system. Older Australians, with their access to superannuation benefits, housing wealth, and franking credits, enjoy substantial tax relief. Meanwhile, younger Australians face rising housing costs, wage stagnation, and higher effective tax burdens.
The Political Impasse
Even modest suggestions for reform—such as limiting franking credit refunds or adjusting negative gearing—have proven electoral poison. The 2019 federal election demonstrated this clearly, when proposed reforms were met with public backlash and political defeat.
What Needs to Change?
Evans suggests the following pillars for meaningful tax reform:
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Broadening the tax base to include more consistent wealth taxes.
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Reforming housing tax concessions to reduce distortions in property markets.
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Taxing intergenerational transfers, through inheritance or capital gains at death.
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Simplifying trust tax arrangements to limit abuse.
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Strengthening political leadership with a vision for long-term equity.
The Cost of Inaction
Evans estimates the total annual revenue loss from concessions and exemptions to be over $400 billion. While not all of this could or should be recouped, a significant portion of it serves no clear public good and entrenches inequality.
Final Thoughts
Australia’s tax system is, in Professor Evans’ words, “remarkably generous”—but only if you’re wealthy. With mounting pressure on public services, worsening inequality, and growing frustration among younger generations, the price of political timidity may soon become unsustainable. Real reform is hard, but necessary—if not for this generation, then for the next.