Australian Tax System 2.0

A Simpler, Fairer and More Sustainable Tax System for Australia?

Firstly, I deal with tax a lot as part of my job, but I am no way a tax reform expert. I have just been curious, is there a way to have fairer, simpler tax system? With the help of my little Copilot tax agent friend, who help with the numbers, I come up with the following reform. I have no idea whether it is better or worse but would be interested in the discussion and debate. What is wrong with it? Is it better or worse than the current system, how and why?

What if Australia could abolish income tax, payroll tax, company tax, stamp duty and council rates—and still fully fund world-class education, healthcare, infrastructure and social services?

This proposal outlines a simpler tax system built around six broad tax pillars: GST, Business Tax, Resource Tax, Land Tax, Wealth Tax and Estate Tax. The aim is to raise approximately $1.2 trillion annually, protect low-income Australians, simplify retirement savings, strengthen the social safety net, and shift the tax burden away from wages and salaries toward consumption, land, natural resources, accumulated wealth and large inheritances.

The result: around 70–80% of Australians are expected to be better off, most workers would pay no income tax, and government services would remain fully funded.

Executive Summary

Australia’s tax system has evolved over many decades and now consists of dozens of taxes, duties, levies, charges and concessions across Federal, State and Local Governments.

The result is a system that:

• Heavily taxes work and productivity
• Is increasingly complex and expensive to administer
• Creates opportunities for avoidance and tax planning
• Makes housing less efficient through stamp duty
• Creates different tax outcomes for similar economic activity
• Relies heavily on income taxation

This proposal outlines an alternative model designed to:

• Raise sufficient revenue to fund high-quality government services
• Reduce taxes on work and wages
• Simplify taxation
• Ensure those with greater capacity contribute more
• Make taxation harder to avoid
• Create a more sustainable long-term revenue base

Why Reform Is Needed

Australia currently raises approximately $839 billion annually in taxation revenue while government spending exceeds $1 trillion annually. The latest Australian Bureau of Statistics data reports taxation revenue at approximately $839 billion and government expenditure at approximately $1.03 trillion. Taxation Revenue, Australia, 2024-25 financial year and Government Finance Statistics, Annual, 2024-25 financial year. [abs.gov.au], [abs.gov.au]

At the same time:

• Healthcare costs continue rising
• Infrastructure requirements are increasing
• Population ageing is placing pressure on government finances
• Income tax is carrying an increasingly large share of the burden

The objective is not to reduce government services, but to fund them more fairly.

The Current versus the Proposed System

Current Tax / Levy / Charge	Current Government Level	Proposed Outcome	Replacement
Personal Income Tax	Federal	❌ Abolished	GST, Wealth, Land, Estate and Business Taxes
Medicare Levy	Federal	❌ Abolished	Funded from general revenue
Medicare Levy Surcharge	Federal	❌ Abolished	Funded from general revenue
Company Tax	Federal	❌ Abolished	Business Tax (Revenue + Profit Model)
Capital Gains Tax	Federal	❌ Abolished	Wealth Tax and Estate Tax
Petroleum Resource Rent Tax	Federal	❌ Abolished	Resource Tax Framework
Fringe Benefits Tax	Federal	❌ Abolished	Business Tax System
GST (10%)	Federal (distributed to States)	✅ Retained and expanded	25% GST with low-income rebate
Fuel Excise	Federal	❌ Abolished	General revenue funding
Tobacco Excise	Federal	❌ Abolished	General revenue funding
Alcohol Excise	Federal	❌ Abolished	General revenue funding
Luxury Car Tax	Federal	❌ Abolished	General revenue funding
Wine Equalisation Tax	Federal	❌ Abolished	General revenue funding
Customs Duties	Federal	Mostly abolished	Limited border/security duties only
Super Contributions Tax	Federal	❌ Abolished	Included through Wealth Tax system
Super Earnings Tax	Federal	❌ Abolished	Included through Wealth Tax system
Payroll Tax	State	❌ Abolished	Business Tax System
Stamp Duty	State	❌ Abolished	Land Value Tax
State Land Tax	State	❌ Abolished	National Land Value Tax
Foreign Owner Surcharges	State	❌ Abolished	Land Value Tax and Wealth Tax
Insurance Duties	State	❌ Abolished	General revenue funding
Vehicle Transfer Duties	State	❌ Abolished	General revenue funding
Mining Royalties	State	❌ Abolished	Resource Tax Framework
Gambling Taxes	State	Potentially retained	Not replaced in current proposal
Council Rates	Local Government	❌ Abolished	National Land Value Tax
Waste Charges	Local Government	Potentially retained as user-pays fee	User-pays charge
Building / Planning Fees	Local Government	Retained	User-pays charge

Current System Revenue Sources

Source	Approx Revenue
Personal Income Tax	~$350B
Company Tax	~$180B
GST	~$95B
Payroll Tax	~$35B
Stamp Duties	~$25B
Land Taxes	~$15B
Excises & Duties	~$100B+
Other Taxes	~$40B+
Total	~$839B

 

The Proposed System

The new model replaces almost all major taxes with six primary tax pillars.

Tax Pillar 1 – GST

GST Rate

25%

Applied broadly across consumption.

Protection for Low Income Australians

GST credits ensure that:

Income	GST Outcome
Up to $45,000	GST fully refunded
$45,000-$80,000	Partial refund
Above $80,000	No refund

This means low-income households effectively pay little or no net GST.

Estimated Revenue

$360 billion

Tax Pillar 2 – Business Tax

Aim was to tax on revenue. To address concerns about taxing low-margin industries, a hybrid model is proposed.

Small Business

Businesses with revenue under $10 million:

Tax

2.5% of revenue

Large Business

Businesses with revenue above $10 million:

Tax

• 2.5% of revenue
• Plus 25% of profit

This ensures:

• Every business contributes
• Highly profitable businesses contribute more
• Low-margin industries remain viable

Estimated Revenue

$250 billion

Tax Pillar 3 – Resource Tax

Australians collectively own Australia’s natural resources.

The system therefore captures both resource production and extraordinary profits.

Royalty

5% of Resource Revenue

Plus

Resource Rent Tax

40% of profits above a 15% return on capital

Applies to:

• Iron Ore
• Coal
• LNG
• Lithium
• Gold
• Rare Earths
• Other minerals

Estimated Revenue

$110 billion

Tax Pillar 4 – Land Value Tax

Replaces:

• Stamp Duty
• Council Rates
• State Land Taxes

Rates

Land Value	Tax Rate
First $500k	0%
$500k-$2M	1.0%
$2M-$10M	2.0%
Above $10M	3.0%

Based on unimproved land value.

Estimated Revenue

$210 billion

Tax Pillar 5 – Wealth Tax

A moderate annual tax applied to substantial wealth holdings.

Rates

Net Wealth	Rate
Under $2M	0%
$2M-$5M	0.5%
$5M-$20M	1.0%
$20M-$100M	2.0%
Above $100M	3.0%

Applies to:

• Investment Property
• Shares
• Trusts
• Business Ownership
• Managed Funds
• Offshore Assets

Estimated Revenue

$130 billion

Tax Pillar 6 – Estate Tax

Targeted only at large wealth transfers.

Rates

Estate Value	Rate
Under $5M	0%
$5M-$20M	10%
$20M-$50M	20%
Above $50M	25%

Exemptions

• Transfers to spouse
• Deferred payment for family farms
• Deferred payment for family businesses

Estimated Revenue

$70 billion

Additional Reforms – Some other things to think about

Superannuation Reform

The current superannuation system is extremely complex.

Removed

❌ Contributions Tax

❌ Earnings Tax

❌ Withdrawal Tax

❌ Concessional Contribution Caps

❌ Non-Concessional Caps

❌ Division 293 Tax

❌ Transfer Balance Complexity

New System

Contributions

Unlimited.

Earnings

Tax Free.

Withdrawals

Tax Free.

Wealth Tax Interaction

First $500,000 of Super:

Exempt

Above $500,000:

Included within wealth tax calculations.

This protects ordinary retirement savings while preventing very large balances becoming tax shelters.

Age Pension Reform

A lot of people on the age pension system get a few dollars and it is more about the card. The Age Pension becomes more of a safety net.

Pension Payments

Means testing becomes significantly tighter.

Couples with approximately:

$500,000+

outside the family home

would generally receive little or no pension.

Universal Pension Concession Card

Every Australian aged 65 and over automatically receives:

• PBS concessions
• Health concessions
• Utility concessions
• Public transport concessions

regardless of pension eligibility.

Estimated Savings

$15 billion

The Additional  Reforms Impact

Reform	Effect
Age Pension Means Testing Tightened	Pension returns to safety-net purpose
Universal Pension Concession Card	Every Australian 65+ retains concessions
Super Contributions Tax Removed	Encourages saving
Super Earnings Tax Removed	Encourages saving
Super Contribution Caps Removed	Simplifies super
First $500k Super Exempt from Wealth Tax	Protects ordinary retirement savings
Wealth Above $500k Super Included	Prevents tax sheltering

 

Proposed System Revenue Summary

Revenue Source	Revenue
GST	$360B
Business Tax	$250B
Resource Tax	$110B
Land Tax	$210B
Wealth Tax	$130B
Estate Tax	$70B
Integrity Measures	$30B
Pension Reform Savings	$15B
Total	~$1.2 trillion

 

Household Examples

Low Income Worker

Income: $40,000

Current System

Pays:

• Income Tax
• Medicare Levy
• GST

New System

Pays GST initially.

GST fully refunded.

No income tax.

Outcome

Substantially Better Off

Median Income Worker

Income: $90,000

Current System

Pays approximately:

• Income Tax
• Medicare Levy

New System

No income tax.

Only GST on consumption.

Outcome

Significantly Better Off

Typical Family

Combined Income: $180,000

House: $1M

Current System

Pays:

• Income Tax
• Medicare Levy
• Council Rates
• Stamp Duty when moving

New System

Pays:

• GST
• Small land tax

No income tax.

No stamp duty.

Outcome

Better Off

Retired Couple

Home: $1.2M

Financial Assets: $350,000

Current System

May receive part pension.

New System

• Pension Concession Card retained
• Pension remains available because assets remain below threshold

Outcome

Largely Unchanged or Better Off

Wealthy Property Investor

Net Wealth: $8M

Current System

Can utilise deductions, structures and concessions.

New System

Pays:

• Land Tax
• Wealth Tax
• Estate Tax

Outcome

Pays More

Ultra-High Net Worth Household

Net Wealth: $100M+

Current System

Often achieves relatively low effective tax rates through structures.

New System

Pays:

• Wealth Tax
• Estate Tax
• Land Tax
• Business Taxes

Outcome

Pays Significantly More

Who Benefits?

Estimated population impact:

Group	Population Share
Better Off	70-80%
Roughly Neutral	10-15%
Worse Off	5-10%

 

Better Off

Includes:

• Low-income earners
• Middle-income earners
• Most families
• Most retirees
• Most small businesses
• First-home buyers

Neutral

Includes:

• Moderate wealth households
• Higher-value owner occupiers without large investment assets

Worse Off

Includes:

• Large property investors
• High-net-worth households
• Large inherited wealth recipients
• Ultra-wealthy individuals

Concerns Raised and How They Were Addressed

Concern 1 – GST Is Too High

Concern

Many people react negatively to a 25% GST.

Solution

The GST rebate system ensures:

• Low-income Australians effectively pay little or no GST.
• Most wage earners are substantially better off after income tax removal.

The GST can also be phased in gradually.

Concern 2 – Revenue Tax Can Destroy Low Margin Businesses

Concern

A pure turnover tax can exceed profits.

Solution

The proposal now uses a hybrid model:

• Revenue component
• Profit component

allowing low-margin businesses to survive while ensuring all businesses contribute.

Concern 3 – Resource Tax Could Make Mines Uneconomic

Concern

Revenue taxes ignore costs.

Solution

Resource taxation now combines:

• Modest royalty
• Resource rent tax on excess profits

similar to successful international resource-tax systems.

Concern 4 – Farmers Are Land Rich but Cash Poor

Concern

Large land holdings may create land-tax burdens.

Solution

Deferred payment arrangements.

Land tax can be paid:

• on sale
• on transfer
• through the estate

No forced asset sales.

Concern 5 – Retirees Could Be Asset Rich but Income Poor

Concern

Some retirees have substantial assets but limited cash flow.

Solution

Deferral mechanisms are available for:

• Land Tax
• Wealth Tax

allowing payment when assets are sold or transferred.

Concern 6 – Wealth Tax Administration

Concern

Wealth taxes can be difficult to administer.

Solution

Moderate rates are used.

Estate tax carries part of the wealth burden.

A national wealth register improves transparency.

Concern 7 – Estate Tax Is Politically Difficult

Concern

Estate taxes are often labelled “death taxes”.

Solution

The tax is:

• Applied only to large estates
• Exempts spouses
• Protects family farms and businesses

Most Australians never pay it.

Benefits Of the Model

Economic Benefits

• Eliminates Income Tax
• Eliminates Payroll Tax
• Eliminates Stamp Duty
• Removes taxes on retirement savings
• Improves labour mobility
• Encourages saving
• Encourages business simplicity

Social Benefits

• Protects low-income Australians
• Strengthens retirement security
• Retains senior concessions
• Makes the pension a genuine safety net
• Requires larger contributions from those with greater capacity

Administrative Benefits

• Fewer taxes
• Reduced compliance costs
• Reduced bureaucracy
• Easier tax administration
• Harder tax avoidance

Conclusion

Current System

Major Taxes

Approximately 20+ major taxes plus dozens of duties, levies and charges.

Examples:

• Income Tax
• Company Tax
• CGT
• GST
• PRRT
• Payroll Tax
• Stamp Duty
• Land Tax
• Excise Taxes
• Council Rates
• Insurance Duties
• Luxury Car Tax
• Medicare Levies
• Super Taxes

Proposed System

Six Primary Revenue Sources

1. GST
2. Business Tax
3. Resource Tax
4. Land Tax
5. Wealth Tax
6. Estate Tax

The result is a far simpler system that:

✅ Removes taxes on work

✅ Removes taxes on retirement savings

✅ Removes stamp duty

✅ Removes payroll tax

✅ Removes council rates

✅ Makes the Age Pension a genuine safety net

✅ Shifts the burden toward consumption, land ownership, resource extraction and accumulated wealth

✅ Still raises approximately $1.2 trillion annually to support high-quality government services.

Australian Tax System 2.0 replaces a fragmented and highly complex tax system with six broad tax pillars:

1. GST
2. Business Tax
3. Resource Tax
4. Land Tax
5. Wealth Tax
6. Estate Tax

The result is a system designed to:

• raise approximately $1.2 trillion annually
• fund high-quality public services
• reduce taxes on work
• simplify taxation
• strengthen retirement and social safety nets
• ensure those with greater capacity contribute more

The overall effect is a tax system where most Australians are financially better off, while the largest contributions come from substantial wealth, land ownership, major resource extraction and large intergenerational wealth transfers.

Additional information for Consideration for the debate

Tax Revenue Impact Summary

One of the key objectives of the proposed model is not simply to replace existing taxes, but to change who pays, what they pay on, and how revenue is collected, while maintaining approximately $1.2 trillion per year in government funding.

Revenue Sources – Current vs Proposed

Revenue Source	Current System	Proposed System	Change
Personal Income Tax	~$350B	$0	-$350B
Company Tax	~$180B	$0	-$180B
GST	~$95B	~$360B	+$265B
Payroll Tax	~$35B	$0	-$35B
Stamp Duty	~$25B	$0	-$25B
Land Taxes	~$15B	~$210B	+$195B
Resource Taxes/Royalties	~$20-30B	~$110B	+~$80B
Wealth Tax	$0	~$130B	+$130B
Estate Tax	$0	~$70B	+$70B
Other Excises & Duties	~$100B+	Mostly removed	-$100B+
Pension Reform Savings	$0	~$15B	+$15B
Integrity Measures	Minimal	~$30B	+$30B

 

Where Revenue Comes From Today

The current system relies heavily on:

Source	Share of Revenue
Personal Income Tax	~42%
Company Tax	~21%
GST	~11%
Other Taxes	~26%

Key Issue

Most revenue is raised by taxing:

• Wages
• Salaries
• Employment
• Business profits

This means productive work bears a significant share of the tax burden.

Where Revenue Comes From Under Tax System 2.0

Source	Revenue	Share of Total
GST	$360B	30%
Business Tax	$250B	21%
Resource Tax	$110B	9%
Land Tax	$210B	18%
Wealth Tax	$130B	11%
Estate Tax	$70B	6%
Integrity Measures	$30B	3%
Pension Reform Saving	$15B	1%
Total	~$1.2T	100%

 

Shift in Who Pays

Current System

Primary burden falls on:

✅ Wage earners

✅ Salary earners

✅ Small business owners

✅ PAYG taxpayers

Many very wealthy Australians can legally minimise tax through:

• Trust structures
• Company structures
• Capital gains concessions
• Superannuation structures
• Intergenerational wealth transfers

Proposed System

The burden shifts toward:

✅ Consumption

✅ Land ownership

✅ Resource extraction

✅ Large accumulated wealth

✅ Large estates

while reducing reliance on taxing labour.

Impact By Household Type

Household Type	Current System	Proposed System
Low-income worker	Pays income tax, Medicare levy, GST	GST refunded, no income tax
Average wage earner	Significant income tax burden	No income tax, GST only
Typical family	Income tax, rates, future stamp duty	GST and modest land tax
Small business	Income tax and payroll tax impacts	2.5% revenue tax
Retiree with modest assets	Similar or slightly better	Pension card retained
Investor with significant assets	Generally pays more
Very wealthy household	Pays substantially more
Large inherited wealth recipients	Pays substantially more

 

Revenue Stability Benefits

The proposed system improves revenue stability.

Current System

Income tax and company tax are heavily influenced by:

• Economic cycles
• Employment levels
• Corporate profit fluctuations

Government revenue can fall sharply during downturns.

Proposed System

Revenue is spread across:

• Consumption
• Business activity
• Land ownership
• Wealth holdings
• Resource extraction
• Estate transfers

This creates a broader and more stable revenue base.

Economic Incentive Changes

Current System

Higher earnings often result in:

• Higher marginal income tax
• Higher effective tax rates

This can discourage:

• Additional work
• Overtime
• Business expansion

Proposed System

Individuals keep all additional earnings.

This may encourage:

✅ Workforce participation

✅ Career progression

✅ Entrepreneurship

✅ Business investment

while maintaining government revenue through broader tax bases.

Distributional Impact Estimate

Based on the design of the proposal:

Outcome	Estimated Population
Better Off	70–80%
Roughly Neutral	10–15%
Worse Off	5–10%

Better Off

• Most workers
• Most families
• Most retirees
• Most small businesses

Worse Off

• Large property investors
• Ultra-high-net-worth households
• Large inherited wealth recipients
• Owners of very large land holdings

Overall Tax Burden Shift

The proposal does not seek to reduce total taxation.

Instead, it changes the basis of taxation.

Current System

Taxes:

• Income
• Work
• Employment
• Company profits

Proposed System

Taxes:

• Consumption
• Land
• Resource extraction
• Wealth accumulation
• Intergenerational wealth transfer

The result is a system that aims to fund approximately $1.2 trillion of public services annually while reducing taxes on labour and shifting more of the burden toward those holding significant land, wealth, resources and inherited assets.