"Australia needs to urgently reform our tax system to stop the mounting burden of company and personal taxes that increasingly drags on productive activities in our economy," said Innes Willox, Chief Executive of national employer association the Australian Industry Group.
New ABS data released today shows the overall tax take in Australia increased to 30.0% of GDP in 2023-24 – the first time it has crossed the 30% threshold in two decades.
This increasing tax burden is wholly driven by just two taxes: company tax and personal income tax. These have increased by 1.2% and 1.3% of GDP respectively over the last decade, while the burden of all other forms of taxation has held steady.
"It's bad enough that the tax burden is mounting at a time our economy desperately needs more investment, job creation and growth. That it's being driven by the types of taxes that work against growth and productivity rubs salt into the wound," Mr Willox said.
"These taxes also have very high rates. The average income tax rate for a single worker in Australia was 24.9% in 2023, while our average company tax rate of 28.5% was the second highest in the OECD.
"Company and personal income tax are taxes on productive activities, the very things we should want the system to encourage. As their burden mounts over time, the tax system increasingly skews against investment and employment generation.
"This slow drift towards an ever-increasing tax burden on productive activities is inimical to our prosperity, and cannot be left to continue.
"To become more investment competitive we should consider cutting the headline corporate tax rate to 25 per cent. This should be matched with a proper set of simplification reforms, which streamline the complicated system of rules and exemptions that interfere with sensible business activity.
"Bracket creep is a scourge on many working families, and has made cost-of-living pressures all the worse. Reforming the income tax system with a view to removing the 37 per cent personal rate will remove much of the penalty applied to working for middle-income families.
"We also need to look to a broadened tax base to remove disincentives to investment and employment. Broad-based taxes like land tax and the GST can have much lower rates for the same revenue effect. If we don't broaden the tax base we will have no choice but to watch the burden of personal and company taxes inexorably rise to meet fiscal requirements.
"Policy leaders can't afford to avoid tax reform after the election. Piecemeal changes that tinker at the margins won't fix a broken tax system. Taking on these challenges is crucial to enhancing prosperity. Not addressing it is a major blind spot in our national debate," Mr Willox said.
The Australian Industry Group's Federal Election 2025 policy statements, which include our analysis on the economic and tax reforms needed for a more prosperous Australia, are available here: https://www.aigroup.com.au/news/federal-election-2025/
