‘I worked hard and paid all my taxes’ does not pass the pub test when tax-free retirements now last so long.
Treasury Secretary Steven Kennedy revealed a telling tax statistic in an underreported briefing about the Intergenerational Report to the Committee for Economic Development of Australia last week.“Over time, population ageing is projected to result in a narrowing personal income tax base,” Kennedy said.Tax-free retirements that last for decades are no longer tenable.In past decades, the intergenerational tax and transfer system was reasonably affordable and fair.
As the population ages, the income tax burden will fall on a shrinking share of working-age taxpayers.Personal income tax will soar to an unprecedented almost 60 per cent of the overall federal tax base by the 2060sA shift to electric vehicles from petrol and diesel in coming decades will cut the fuel excise tax base, while an expected decline in cigarette smoking rates will erode tobacco excise.
We are heading for what former Treasury secretary Ken Henry has lamented as an “intergenerational tragedy”.Gross household median income for people aged 65 to 74 was $50,700 in 2022, the Australian Bureau of Statistics says. But their disposable household income, which strips out income taxes, was almost the same at $50,180. They are paying very little, if any, income tax.
Extending the 15 per cent rate on super earnings to all age groups would be fairer, simpler and more sustainable.