A proposal to reform Australia’s Goods and Services Tax (GST) could result in every adult receiving an annual rebate of $3,300. This initiative, backed by independent MP Kate Chaney, aims to raise the GST rate to 15 percent and broaden its application to include food, education, health, childcare services, and water and sewerage. Proponents believe this reform could generate an additional $28 billion for the budget each year, significantly improving living standards across the country.
Under the plan, the proposed GST increase is expected to raise approximately $92.5 billion in its first full year. This revenue would be offset by the $3,300 rebate for each adult over the age of 18, effectively neutralizing the impact of the higher GST on the first $22,000 of individual annual purchases. The scheme is designed to ensure that low- and middle-income earners would be better off by up to $371 annually, while the wealthiest 20 percent would face additional costs of over $2,200, ultimately costing the government around $68.8 billion.
Chaney, who has collaborated with economist Richard Holden on this concept for the past two years, emphasized the need for open discussions on all tax reform options. “GST is an efficient tax – it is hard to avoid – and with lower- and middle-income groups potentially better off under this proposal, it can be progressive. Unlike personal income tax, it doesn’t hamper productivity,” Chaney stated.
Holden is set to release a paper on the so-called “progressive GST” alongside fellow economist Rosalind Dixon. He argues that this reform would particularly benefit younger Australians, who currently bear a disproportionate share of personal income tax. “Our proposal would make our taxation system more efficient, make our economy more dynamic and provide the impetus for productivity growth,” Holden said.
Despite the enthusiasm from some independent lawmakers, Prime Minister Anthony Albanese has expressed reluctance to alter the GST. When the tax was first introduced by the Howard government, an agreement was made with the states and territories to allocate all GST revenue to them. On October 25, 2023, Treasurer Jim Chalmers reiterated that the government is not actively seeking alternatives to this longstanding agreement.
The roundtable discussion also brought attention to other pressing economic issues. Independent MP Allegra Spender, the only non-major party representative at the event, highlighted the challenges associated with the National Disability Insurance Scheme (NDIS). Citing research from McKinsey and the e61 Institute, Spender warned that the current 8 percent yearly growth target for the NDIS could jeopardize its sustainability and social license if not addressed.
“If the non-market economy is going backwards, and it has seen virtually no measurable productivity growth in the last 20 years, then it is very hard for the overall economy to be growing productively,” she explained. Spender anticipates discussions on the care economy will occur early in the roundtable, focusing on enhancing the efficiency of government services.
The independent think tank, Centre for Policy Development, has submitted recommendations advocating for comprehensive changes to the GST and other tax elements. It argues that while improving productivity requires more than just tax reforms, significant gains can be achieved by reducing reliance on income taxes and transitioning towards consumption and economic rent taxes. This approach includes increasing the GST rate and expanding its applicability, creating a unified resource rent tax, indexing personal income tax thresholds to inflation, and replacing state stamp duties with a land tax.
In a related note, the Centre for Independent Studies has warned that without a boost in productivity, Australians’ living standards are likely to decline. Economist Jim Cox contends that Australian businesses are lagging in adopting new technologies compared to their international counterparts. He stressed that regulation, particularly at the Commonwealth level, has increased dramatically in recent years, alongside a cultural shift prioritizing environmental protection over economic growth.
Cox advocates for a renewed wave of micro-economic reforms, smarter regulations, and a national dialogue on innovation drivers, asserting, “Prosperity is not automatic. It requires deliberate choices: investment in skills, encouragement of risk-taking, and institutions that reward creativity rather than rent-seeking.”
Meanwhile, the Australian Council of Trade Unions (ACTU) is pushing for a national skills levy that would require medium to large employers to contribute to the training costs of their workforce. They propose that businesses with an annual turnover exceeding $500,000 should allocate 1.5 percent of their payroll to training or face a corresponding levy.
As the roundtable convenes, the discussions surrounding GST reform and broader tax changes are poised to shape Australia’s fiscal landscape in the years to come.
