Tax reform on the agenda as the government's economic roundtable ends | 7.30

Key Concepts:

• Economic Reform Roundtable
• Intergenerational Tax Fairness
• Tax Reform (Income Tax Cuts, Multinational Tax, Road User Charging)
• Business Investment
• Sustainable Funding for Services (Aging Population)
• Regulation & Red Tape Reduction
• Productivity
• EPBC Act Reform
• Superannuation Performance Test
• Cabinet Decisions

1. Economic Reform Roundtable & Tax System Inequities

• The federal government's economic reform roundtable concluded after 327 contributions over 29 hours.
• Treasurer Jim Chalmers acknowledged the tax system's fundamental unfairness to younger workers compared to older Australians.
• The roundtable identified intergenerational fairness as a key objective for tax reform.
• Chalmers stated the government's priority remains cutting income taxes as legislated and working on road user charging for EVs.

2. Tax Reform Objectives & Considerations

• Three key objectives for tax reform emerged from the roundtable:
  • Intergenerational fairness, particularly for working people.
  • Attracting more business investment.
  • Simplifying the system and making it more sustainable to fund services for an aging population.
• Progress on these objectives is a matter for cabinet.
• Chalmers emphasized that the tax changes made so far have aimed to benefit younger workers and women across the income scale.
• He cited tax breaks for built-to-rent properties as an example of applying an intergenerational lens.

3. Specific Tax Measures & Policy Stance

• Chalmers clarified that no decisions have been made to change policies regarding retirees paying tax on earnings/withdrawals, reducing the capital gains discount, or cracking down on family trusts.
• He pointed to existing legislation aimed at making superannuation tax concessions more sustainable.
• The roundtable was intended to inform, not replace, cabinet decisions.
• The government will act on making the tax system fairer in a considered and methodical way.

4. Regulation, Productivity & EPBC Act Reform

• The government aims to improve regulation, cut red tape, and reduce compliance costs to boost productivity.
• The Productivity Commission will assist with benchmarking and setting targets for regulation reduction.
• Better regulation is seen as crucial for building more homes quickly, lifting living standards, and sustaining real wage growth.
• Chalmers mentioned asking Environment Minister Murray Watt to expedite reforms to the EPBC Act, with potential announcements in the coming weeks.

5. Road User Charges for EVs

• There was significant appetite at the roundtable for road user charging for EVs, but no consensus on the model or timing.
• Chalmers will work with state treasurers on an options paper, with discussions scheduled for September 5th.
• The level of revenue expected from road user charges depends on the model and timing, which are yet to be determined.

6. Superannuation & Housing Investment

• Chalmers will re-examine the superannuation performance test, emphasizing that he will not abolish it or interfere with the primary purpose of maximizing returns for members.
• The review will consider whether the performance test creates unnecessary barriers to super funds investing in areas like housing or energy.

7. Productivity Challenge & Long-Term Approach

• Chalmers acknowledged the long-standing productivity challenge in the Australian economy.
• He emphasized that turning it around requires sustained, collaborative, and consultative work across multiple fronts.

8. Business Leaders' Perspectives

• Business leaders described the roundtable as an important process for setting a course for real action.
• They emphasized the need for a simpler, fairer tax system that works better for business and working Australians.

9. Political Analysis by Jacob Grieber

• Jacob Grieber observed that the government has given itself a large agenda for the rest of its term.
• Treasurer Chalmers is maintaining flexibility for cabinet decisions, leaving open the option of making changes before the next election.
• The roundtable is intended to inform the next three budgets, which will need to address the structural budget deficit.
• Grieber noted a sense of unity around the issue of intergenerational fairness in the tax system.
• Potential areas for reform include the treatment of trusts and superannuation concessions.
• The road user charging issue is seen as a potential early win for the government.
• Harder questions remain around intergenerational fairness and the treatment of different types of income in the tax system.

10. Synthesis/Conclusion

The economic reform roundtable served as a broad consultation to inform the government's future economic policies, particularly in tax reform. While specific policy changes remain subject to cabinet decisions, the roundtable highlighted the importance of intergenerational fairness, business investment, and sustainable funding for services. The government is exploring various avenues for reform, including road user charging, EPBC Act amendments, and adjustments to the superannuation performance test, while acknowledging the long-term nature of the productivity challenge. The success of these efforts will depend on sustained collaboration and a willingness to tackle politically sensitive issues.