Three reform scenarios shaping Treasurer Jim Chalmers' tax agenda at upcoming productivity roundtable

Sky News AU

7 hours ago

Treasurer Jim Chalmers has foreshadowed significant tax reform, but there are three possible scenarios likely to arise from his upcoming productivity roundtable.
The Albanese government's productivity summit in August 2025 will bring together businesses, unions and leaders to discuss potential economic reforms.
Mr Chalmers opened the door to major tax changes for the first time in years at the National Press Club on Wednesday, outlining 'progressive and patriotic' reform.
According to sources, there are three possible scenarios likely to emerge from the reform push - and each one could shape the future of the tax system.
The first scenario sees the best-case outcome for Mr Chalmers - business and other stakeholders unite behind a shared reform agenda.
This would give the Albanese government the political cover to act decisively and push ahead with meaningful changes.
The second scenario is less rosy, and would result if consensus breaks down and scare campaigns erupt.
In such a case, the government would decide to shelve major changes and instead focus on implementing the modest agenda it took to the last election.
The third scenario would be the boldest, and it would be that, even in the face of criticism, Mr Chalmers proceeds with tax reform proposals anyway.
He would either put these to voters at the next election in 2028 or design a phased system that would not come into effect until after it.
Emboldened by Labor's strong electoral mandate, there have been loud calls to lift the Goods and Services Tax (GST) in exchange for income tax cuts.
However, Mr Chalmers poured cold water on such a possibility, dampening the hopes of economists who have requested the change for decades.
'Historically I've had a view about the GST. I think it's hard to adequately compensate people,' he told reporters at the National Press Club.
'I think often an increase in the GST is spent three or four times over by the time people are finished with all of the things that they want to do with it.
'But what I'm going to try to do… I'm going to try not to dismiss every idea that I know that people will bring to the roundtable.'
Despite this, AMP's chief economist Shane Oliver has since urged Labor to hike the GST and apply it across the board to minimise income tax.
'In an ideal world you would have less reliance on income tax and reduce the disincentive effects associated with it and have more reliance on GST,' he said
'It's seen as a fairly efficient tax because if you're taxing all goods and services at the same rate it doesn't distort people's economic decisions.
'The GST is a good tax. Economists like it because it's neutral.'
CPA Australia's chief executive Chris Freeland also urged reform as the tax system remains 'overly reliant on personal and company income tax'.
'We welcome that the Treasurer was careful not to rule in or rule out any changes at this stage,' Mr Freeland said.
'Australians deserve a mature and honest conversation about the trade-offs required to fund the services and resources they expect.
'That must also include examining and fixing the GST and federal-state arrangements.'
CreditorWatch's chief economist Ivan Calhoun said the Treasurer expressing a more open attitude towards GST than he, or his predecessors, had in the past was positive.
'He actually used that three letter GST acronym which has just been off the agenda for any political party,' Mr Calhoun said.