Tax.
Four levies.
$770 billion.
Australia has scrapped its tangle of state and federal taxes and replaced them with four transparent levies. The total tax take has fallen from 29% of GDP to 25%, and yet the Commonwealth and the states between them collect more revenue than they did under the old system, because compliance is simpler and evasion is harder.
The four levies
- A 5% Revenue Tax on all income — wages, business receipts, capital gains — with no exemptions. Levied once, at the point of receipt, on a base of approximately $9.3 trillion of annual gross receipts. Yields $466.5 billion. Replaces personal income tax, company tax, GST, fuel and other excise, payroll taxes, and miscellaneous federal taxes.
- A 10% Land Value Tax on the unimproved value of commercial land. Excludes the family home, the family farm, mines (separately taxed), schools, and hospitals. Levied on a base of $2 trillion. Yields $200 billion. Replaces state stamp duties and the existing patchwork of state land taxes.
- A 5% Import Tariff on imported goods, applied uniformly. Levied on $450 billion of annual imports. Yields $22.5 billion.
- A 25% Resource Extraction Levy on the gross value of mineral and petroleum resources extracted, including offshore operations. Levied on a $325 billion industry. Yields $81.25 billion. Replaces state royalties and the petroleum resource rent tax.
The four levies together raise $770 billion a year: $606 billion to the Commonwealth, $164 billion to the states.
The shift in burden
The old system extracted $533 billion a year from work and consumption. The new system takes $466 billion from the same base — a $67 billion reduction — while drawing $233 billion more from land and resource wealth that was previously taxed lightly or not at all.
For households, the change is large. A worker who currently pays personal income tax, GST on every purchase, and fuel excise sees an average $18,000 increase in disposable income before any change to welfare. For a household that currently draws Family Tax Benefit or other welfare to offset its tax burden — payments that the household no longer needs once the tax is gone — the net gain is approximately $6,050 per year. The two figures describe different households: the higher figure for those who don't draw welfare, the lower figure for those who do. No pensioner is worse off.
States are not defunded
GST is removed at the cash register, but the states are not defunded. Their share of the new revenue ($164 billion in year one, $395 billion by 2050) is delivered through the rebuilt federal-state funding mechanism described in Part V.
Compliance and evasion
The administrative cost of the existing tax system is approximately $20 billion a year. Evasion costs the public a further $60 billion. The four-levy system reduces compliance costs by an estimated $18 billion and halves evasion.