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Allegra Spender is aiming to tackle the tax reform issue head on with the release of her Tax Green Paper but will tax reform remain stuck in its stagnant state?
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The road ahead for tax reform
06 December 2024
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My great-grandmother, who I called Grandma Mack, was a remarkable woman. Born around 1886, she passed away when I was just eight. One of her frequent tasks was meticulously cutting her front lawn with a pair of scissors. Now, it wasn’t a big lawn, but it took incredible determination and labour to achieve that perfectly manicured look.
Why am I telling you this? Because tax reform in Australia has hit the agenda again, and oddly enough, thinking about tax reform often reminds me of Grandma Mack and her scissors. There’s something about the endless, painstaking effort of cutting grass with scissors that feels eerily similar to the decades-long saga of Australia’s tax reform debate.
Let me explain.
Tax reform in this country feels like an endless loop. A little snip here, a little snip there, and just when you think progress has been made, the same issues grow back—thicker and more daunting than before. What we seem to lack is the determination to grab a metaphorical lawn mower and get the job done.
Enter Allegra Spender, the Federal Member for Wentworth, who recently released a Tax Green Paper in November 2024. Spender, an independent member of the so-called Teal Independents, is tackling the tax reform issue head-on. And for that, she deserves commendation. It’s no small feat to take on tax reform, especially as an independent in a highly polarised political landscape.
Now, Spender’s Green Paper isn’t a policy manifesto. It’s designed to spark discussion and outline a path forward. Importantly, it focuses solely on the tax system, leaving out broader issues like government spending and the transfer system.
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Her key principle? Tax neutrality. Whatever reforms are made shouldn’t result in an increase in the total tax collected. That said, she does express a preference for reducing the overall tax burden in Australia.
The paper highlights some critical challenges facing our nation. For one, the generational wealth gap is widening. Younger Australians find it increasingly difficult to buy homes, burdened by rising living costs, student debt, and stagnant wages. Over the past 25 years, home prices have quadrupled, while incomes have merely doubled. As a result, home ownership rates have dropped significantly over the last 40 years.
Then there’s productivity. Growth is slower than at any time in the past 60 years, and business investment is declining. Without a boost in innovation and efficiency, our standard of living is at risk. As a Teal, Spender also emphasises the urgent need to address climate change, an area where tax policy could play a pivotal role.
But what does tax have to do with all this? Quite a lot, actually. Spender argues that our current tax system penalises labour—especially younger workers—while rewarding passive income and property investment. This exacerbates the generational divide and stifles economic mobility.
Her Green Paper proposes seven priorities for reform:
1. Lower income taxes to help Australians get ahead.
2. Adjust tax settings to encourage home ownership.
3. Incentivise innovation and business investment to drive productivity.
4. Stabilise the revenue base to account for demographic and consumption changes.
5. Use tax policy to support the energy transition.
6. Establish a Tax Reform Commission to navigate future challenges.
7. Ensure that reforms are thoughtfully implemented to minimise disruption.
To make this happen, Spender calls for immediate action in the next parliamentary term. She advocates for a structured policy development process, robust community engagement, and the establishment of an independent Tax Reform Commission.
However, history makes me sceptical. Over the past 40 years, we’ve seen countless reviews, conferences, and debates about tax reform. Major changes have been rare—think the GST in 2000—and often overshadowed by political infighting. The tax system has become a weapon in election campaigns, reducing complex proposals to simplistic slogans and fearmongering sound bites.
Spender rightly notes that the community must be an active participant in this debate. But tax is a complex issue, and many Australians feel unequipped to engage. An independent Tax Reform Commission could help bridge this gap, provided it’s truly free from political interference.
Still, I’m cautious. Political realities often prioritise short-term wins over long-term solutions. Tax reform in Australia remains a politically volatile topic, subject to negotiation and compromise rather than clear, strategic thinking.
That said, Spender’s efforts are commendable. Her Green Paper is a thoughtful and well-researched attempt to elevate the conversation. As she puts it, the choice we face is whether to tackle our challenges head-on or retreat into politics as usual, letting the problems grow more intractable.
And so, the debate continues. Snip, snip, snip.
John Jeffreys provides tax training and produces tax information for tax professionals. He is a director of John Jeffreys Tax Pty Ltd.
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