In Albo’s Australia, it seems if you don’t earn a wage, you’re a suspect. Farmers, investors, small business owners, and entrepreneurs — the very people who create jobs, build exports, and take the risks that make this economy tick — are being treated as tax dodgers. They’re not. And someone should say so.
With the PM backing down on parts of Treasurer Jim Chalmers’ “Nightmare on your street” Budget, I’ve been forced to reflect on my first positive business brush with Australia’s 31st Prime Minister, Anthony, “it’s not a lie, if you believe it” Albanese.
It was before the 2022 election, and Albo was rolled out as a would-be prime minister at a lunch laid on by the party for business leaders and the press. The message was that they — the ALP — had learnt from the Bill Shorten loss in 2019 and they were going to listen to business. No one expected them to be excessively pro-business, but the organisers made sure Paul Keating was a star participant in the let’s cosy up to business bash.
In his speech, Albo went out of his way to draw parallels with the reforming Hawke-Keating era and most there, if they weren’t rusted on Labor-haters, thought well if they deliver on this promise, these guys might be OK.
I always remember Albo giving me a friendly nod of the head as he departed and it was something that gave me mixed feelings. On one hand, was he saying I think we have made a good impression and it’s good to see you here to witness our ‘getting smart’ as a party. Or was it, thanks for coming, and I think we have fooled them.
Being a positive type, I opted to focus on the former, as I’ve always tried to avoid being a one-trick pony when it comes to looking at politicians and what they’re up to when it comes to the economy. If Labor gets it right, I give them a tick but if they screw up, the likes of Jim and Albo cop it.
The 2026 Budget, which was inspired by the crazy and unexpected landslide victory for Labor in May 2025, confirms for me that Albo either sold me a dummy, which I fell for, or he doesn’t really get the role that business plays in this economy/country he leads.
In case you missed it, the impassioned outcry against aspects of Chalmers “tax reform” as he likes to call it, has led to proposed changes.
This is what you should know.
- 2.7 million small businesses turning over up to $10 million would be eligible for the 50% capital gains tax (CGT) discount.
- The cut-off used to be $2 million.
- Right now. small businesses have access to four different CGT concessions, one of which is the 50% discount.
- Now, if you own the business for 15 years or more, there is no CGT payable if the turnover is under $2 million.
- The new tax proposals are that a business with turnover between $2 million and $10 million will only get the 50% discount CGT concession but it will be applied after the inflation-based discount is applied.
- The minimum 30% CGT rate, that the Budget’s cunning plan introduced, will then apply to the final net gain.
- Finally, the minimum 30% tax on discretionary trust distributions, which go to beneficiaries after the creator of the trust dies, will be dumped. Critics have been calling this a “death tax”.
Publicly reflecting on the backdown, which the PM is not calling, Albo showed his grasp on things economic and business, as well as investing is not the stuff of high distinctions at this country’s universities, where I once hailed from.
The AFR reported him saying the following: “I have seen editorial after editorial speaking about the tax system, and how it was too reliant upon pay-as-you-go workers’ taxes. What we’re doing is making sure that the tax system is fairer, that it treats income from assets more equally with income from work, which is overwhelmingly how working Australians earn their income and get by.”
Call me an economist who has canvassed my views on economics, politics and money for over three decades in some of the most watched, read and listened to media outlets, I have never read tax reform expressed in terms such as our tax system “was too reliant upon pay-as-you-go workers’ taxes.”
That’s an interpretation that suits a politician talking to voters who currently are running with their votes to Pauline Hanson, who is bound to be an even bigger target for the dirty tricks mob out there, with the surprise revelation that she is now the most-preferred for PM in the latest Resolve Monitor popularity poll.
What respected economic writers have said, Albo, is that we are too reliant on taxing income and we under-tax consumption of goods and services. That is, we need, say a 15% GST, like the Kiwis, and on lot more of stuff than we are currently paying. Our cousins across the ditch don’t have a comprehensive capital gains tax slugging all and sundry who take risks to build income.
By the way, the VAT in Europe is way over 15%, as the table below from taxfoundation.org shows.
Albo seems to think the only tax on income that needs to fall is taxes on wages, but small business people make profit and get taxed on their business success and taxed again if they have the audacity to draw income out of their business. These people mortgage their homes, hire people, collect GST, cope with landlords, endure the new age workforce demands of work-from-home and they have to become caring leaders of workers who have high levels of mental health stress.
If these people take home the same pay as say a public servant and get taxed exactly the same, I get it but I do think these people need to be respected for their social contribution and the risks they take.
Investors putting money into companies such as Megaport, which is doing a capital raise should not be singled out as tax dodging players not needing a 50% capital gains tax discount, but more as risk-takers who are providing money, so this company doesn’t have to borrow from a bank.
Albo and his crew don’t appreciate the other income earners and taxpayers, which include some of the biggest risktakers — farmers — who not only create jobs, prop up country towns but also earn export income that is pretty damn important to our GDP and employment levels that bankroll our lifestyles.
All Australian income earners should be treated equally but there’s nothing wrong for the leader of the country to recognise the trailblazers of business, the employers who pay the wages and the risk-takers who roll the dice on businesses and investments.
And if you don’t think they’re taking risks, then know that 60% of new small businesses close within three years and 50% of them are actually in profit! So, why do they close — it’s a bloody hard gig. Treasurers and PMs shouldn’t be hounding them with tough tax changes, an aggressive tax office and excessive red tape regulations.
I really wish that nod from Albo was saying: “I’ve got this and I know if I make it good for business, business will make it good for all of us, including his beloved wage earners.
Hi Peter, I agree with your comment re increasing the GST to 15% and brodening its scope of application.
Would you like to comment on when this was last suggested the Government decided that the cost to adjust pensions would be prohibitive to offer current thinking in this regard?
It seems to me it would simplify collection and most evasion tactics. I note Christopher Joy included a similar propasal in his article of “what a good budget should look like” a few weeks ago. Look forward to your comments.
I had trouble matching your views on taxation to the following apparently factual material published by the Australia Institute. They don’t comment on consumption taxes as such, but I generally agree with your views on the need for increases in consumption taxes. However, our relatively low levels of welfare suggest cureent levels of poverty in Australia would be exacerbated.
“Australia is one of the lowest-taxing countries in the developed world. While it is sometimes suggested that Australian governments spend too much, the reality is that Australia raises very little tax revenue compared to similar countries. Insofar as Australian governments have a problem balancing revenue and spending, that problem lies in the level of revenue collected, not the amount it spent.
Tax is good
This graph shows the 38 economies in the Organisation for Economic Cooperation and Development (OECD) in order of tax revenues as a percentage of their economy (GDP). Only eight have lower tax to GDP ratios than Australia, and these include relatively low-income countries like Türkiye and Mexico, as well as tax havens like Switzerland and Ireland.
If Australia were to increase the level of revenue it collects from taxation to the OECD average—a level similar to that collected by Canada or New Zealand—the Commonwealth would have had an extra $140bn in revenue in 2023–24.
This figure is 20% of the Federal Budget. It is also equivalent to the combined cost of the Aged Pension, the NDIS, Jobseeker, and Child Care Subsidy, along with the total government spending on housing, vocational education, and both the ABC and SBS.
Less tax means less social services…
Because of its low revenue, Australia spends less on social services than most OECD countries.
It spends less on aged pensions than all but five OECD countries, mainly very low-taxing nations as Mexico and Chile. (OECD)
Its unemployment benefits are the lowest in the OECD relative to the average wage in each country. (OECD)
As a result, despite Australia being one of the richest nations in the OECD—in 2023, it had the eighth highest income per person—its level of poverty is above the OECD average.
…and less happiness
Of the countries with higher average incomes per person than Australia, most collected higher tax revenues, including Norway, Denmark and Iceland.
Only the USA and Ireland had a higher GDP per person and lower taxes than Australia. However, Ireland is a tax haven, while the USA’s high average GDP figure masks high levels of inequality; it
rates lower than Australia on all other wellbeing metrics.
Similarly, the UN World Happiness Report assesses happiness based on income, health, corruption and freedom. The ten countries that are rated as happier than Australia, including the five Nordics, all have higher levels of tax.
In summary, countries that score higher than Australia on wellbeing metrics also raise more tax than Australia does. This allows them to spend more money on social services, which increases
the wellbeing of their population. If Australia is to improve the wellbeing of its population, increasing public revenue and increasing social spending is the easiest way to do so.
How Australia should raise more revenue
Raising more tax revenue does not necessarily mean major increases in the tax bills of most Australians.
Measures that could raise substantial government revenue while improving equality and environmental outcomes include:
Reduce superannuation tax breaks, which overwhelmingly benefit the wealthiest and cost over $50 billion each year in foregone revenue
Eliminate fossil fuel subsidies, which cost $14.5 billion in 2023–24
Increase charges for the fossil gas industry—more than half of Australia’s gas exports pay no royalties and none pay Petroleum Resource Rent Tax
Impose a tax on carbon emissions, which would raise an estimated $70bn per year
Remove capital gains tax discounts and negative gearing; The Australia Institute estimates that the former alone will cost the government $15.5bn in lost revenue in 2024–5
Read our report ‘Australia’s income tax obsession debunked’ for more.”
Cut out the ridiculous and much rorted Travellers Refund Scheme. This will save a lot.
Increase the GST.
Importantly, stop taxing Capital. Keep pre 1985 assets exempt from CGT. And most importantly, stop wasting the taxes collected.
Harry………..YOU nailed it ! “stop wasting the taxes collected.”
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This is the least “worthy” government we have ever elected !
NDIS….good intentions , diabolical outcome !
Their answer to everything is to THROW MONEY AT IT….and….hopefully….
whenever they do , there’s VOTES IN IT FOR LABOR ! So far , it has worked for them !
MONEY FOR MIDDLE-EAST TERRORISTS in GAZA !
Recent aid (since October 2023): Over $130 million in direct humanitarian assistance to Gaza and the region. ……and additionally , Historical aid (2005–2023): Over $300 million
“Of course they are ONLY buying food and not weapons with the money , honestly !!! ”
MONEY FOR A RUGBY TEAM IN PAPUA-NEW-GUINEA ! “A$600 million and of course PNG is also putting money towards it too !!”
MONEY FOR THE SOLOMON ISLANDS ! $468 million…EVERY YEAR…….and despite this , they STILL have a defense pact with CHINA !
CALLING THEM STUPID doesn’t do justice to STUPID PEOPLE [ because they can’t help themselves ! ] BUT LABOR CAN…and it intends to KEEP HELPING ITSELF TO YOUR CASH
Peter, I fully agree with this article, but I actually think the issue may go even further.
For decades there has been an unwritten social contract in Australia: small business owners accepted the risk, stress, compliance burden and personal exposure of running a business, and in return the tax system recognised that risk through legitimate structures and incentives, including family trust distributions, particularly for genuine family-run businesses.
That balance now seems to be disappearing.
The proposed 30% minimum tax on discretionary trust distributions, particularly if non-refundable, is abhorrent. It shows a complete lack of understanding of how small business actually works. A small business owner can employ staff, collect GST, administer PAYG, carry the debt, sign the lease, deal with the ATO, pay the super, risk the family home, and potentially face legal action years later for work performed in the business. Yet the employee who performed the work often carries none of that personal commercial risk.
Payday super will only further exacerbate this. Once again, the policy objective may sound reasonable in theory, but the practical burden lands squarely on employers. Small business owners will be expected to manage more frequent super payments, tighter payroll timing, additional reconciliation pressure, and greater exposure to penalties if something goes wrong — all while already acting as unpaid tax collectors and compliance officers for the government.
The imbalance is everywhere. An employee can often obtain bank finance after three months in a job, while the employer who created that job may need to show 12 to 24 months of profitability before a bank will even take them seriously.
Small business owners carry the stress of the business 24/7, not 9 to 5, five days a week. They employ people, train people, absorb mistakes, deal with clients, manage cash flow, carry the regulatory risk, and keep the wheels turning. Yet instead of being recognised for that contribution, they are increasingly being treated as if they are doing something wrong.
There seems to be no appreciation that many of these so-called “tax benefits” were never loopholes. They were part of the incentive structure that made it worthwhile for people to take risks, build businesses, employ staff and support the economy.
The most concerning part is how quiet the major business and professional lobby groups seem to be. Why are they not pushing back harder? Why is this being allowed to become accepted as normal?
Small business owners are not the enemy of the tax system. In many respects, they are the backbone of it.
Spot on Peter, all income should be taxed the same that is no differentiation if is salary or interest income further distribution of income from trust should also be taxed at the recipient’s prevailing tax rate. The minimum tax on distributions is a veiled reincarnation of the non refundable franking credit that Bowen devised for Shorten in 2019.
In respect of CGT, the proposed minimum 30% tax on gains is just pure theft and is targeting those with low other income such as students and people living on tax free super pensions, not sure why the Government hates investors?
expenses incurred on investments properties should only be able to offset against income earned from that property. Negative outcomes are a bad investment decision.
It’s a good point that taxing business profits without recognising entrepreneurial risk may discourage investment. Clear Tax can help assess how tax changes affect cash flow, retirement planning, and investment growth.
Well done Peter, great article, you’ve summarised the tax situation in Australia perfectly. you know what is going on. Pity our politicians are so blind and wet behind the ears.
Thanks Peter for giving a voice on how many of us feel
An aggressive ATO mentioned once is a huge interuption recently to all businesses. I’m an accountant in public practice for the last 40 years and I have never witnessed the amount of disruption the ATO is causing. Seems they need income to pay for stupid econonic promises?