For years, economists, business leaders, and even politicians have been saying the same thing – Australia’s tax system needs and overhaul. In October 2023, the Organisation for Economic Co-Operation and Development (OECD) released a detailed report backing that up, calling for some big shifts in how we raise revenue.

The OECD’s Big Ideas

Here’s what they recommend:

1. Raise and broaden Goods and Services Tax (GST)

Our GST is just 10%. The OECD global average is closer to 19.5%. They suggest increasing the rate and reducing exemptions, with rebates or compensation to help lower-income households.

2. Cut back on pension tax perks

Some retirement income currently isn’t taxed. The OECD says winding back these concessions could boost revenue and make the system fairer.

3. Swap stamp duty for land tax

Stamp duty hits you as a single payment when you buy your property – which can discourage people from moving. An annual land tax could spread the cost, improve fairness and make the housing market more flexible.

4. Consider inheritance and estate taxes

Many countries tax large inheritances. Australia doesn’t – but the OECD says it could be a fair way to raise revenue and address wealth inequality.

Why This Matters Now

Australia’s 2023 Intergenerational Report has some sobering news:

• Traditional revenue source – like fuel excise, tobacco duty and mining royalties – are set to shrink over coming decades
• An ageing population means fewer working-age Australians, less income tax collected and more spending pressure from health and pensions

Right now, we lean heavily on income taxes to fund services. If we don’t broaden the tax base, future governments may struggle to maintain essential programs.

The Bottom Line

Australia’s tax system wasn’t built for the challenges we see coming – and the OECD’s recommendations are designed to start that conversation. Reform won’t be easy, but if it’s done carefully and fairly, it could create a system that’s more sustainable, more balanced and better equipped for the decades ahead.

Written by Rohin Sharma