Let’s be honest. Most Australians have a rough idea that they pay tax, a vaguer idea of how much, and almost no idea of how many different ways the government collects it. We know about income tax because it hits us every pay cycle. We know about GST because it shows up on the receipt when we buy a flat white. But beyond that? It gets murky fast.
With a budget season looming, a Senate committee investigating capital gains tax, and think tanks calling for everything from inheritance taxes to wealth taxes, now feels like a good time to actually understand what we’re paying, what’s changing, and what might be coming.
The Taxes You’re Already Paying
Income Tax
The big one. Australia runs a progressive income tax system, which means the more you earn, the higher your rate. Currently, income up to $18,200 is tax-free. From there, you’re paying 16 per cent up to $45,000, then 30 per cent up to $135,000, 37 per cent to $190,000, and 45 per cent above that. These rates are actually shifting downward in the next two years, which we’ll come to shortly.
On top of your base income tax, most Australians also pay the Medicare Levy, which sits at 2 per cent and funds the public health system. Higher earners without private hospital cover can also get hit with the Medicare Levy Surcharge on top of that.
GST
The Goods and Services Tax has been sitting at 10 per cent since the Howard government introduced it in 2000. It applies to most goods and services, though fresh food, healthcare, education and financial services are exempt. It is straightforward enough in theory, though the exemptions have always created some entertaining edge cases (a plain biscuit is GST-free, but add chocolate and you owe the government a cut).
Capital Gains Tax (CGT)
If you sell an asset, including property, shares, or collectibles, for more than you paid for it, the profit is considered a capital gain and becomes part of your taxable income. The catch that has become the centrepiece of a national debate is the 50 per cent CGT discount, which has been in place since 1999. Hold an asset for more than 12 months and you only pay tax on half the gain. Treasury estimates the revenue forgone from CGT discounts in 2025-26 will grow to $21 billion, with the figure climbing dramatically over the forward estimates.
Your primary residence is exempt from CGT, which is one reason the family home has become such a central part of Australian wealth building.
Superannuation Tax
Contributions to your super are generally taxed at a concessional 15 per cent rather than your marginal income tax rate, which is a fairly significant benefit for most workers. Earnings within the super fund are also taxed at 15 per cent. The Superannuation Guarantee rate has increased from 11.5 per cent to 12 per cent from the 2025-26 financial year.
Stamp Duty
This one is a state tax rather than a federal one, and it applies every time you buy a property. The rate varies by state and by the value of the property, but in a city like Melbourne or Sydney where median house prices sit well above a million dollars, you can easily be paying tens of thousands in stamp duty before you’ve even bought a stick of furniture. Victoria, NSW and the ACT have been exploring or implementing transitions to annual land taxes as an alternative, though uptake has been gradual.
Land Tax
Most states charge an ongoing annual land tax based on the unimproved value of the land you own, excluding your principal residence. Investors with multiple properties tend to feel this one.
Excise Duties
Fuel, tobacco, and alcohol all attract excise duties, which are essentially taxes applied at the point of production or importation. The tobacco excise in Australia is among the highest in the world, which is why a pack of cigarettes now costs the better part of $50. The federal government recently paused indexation on draught beer excise for two years from August 2025, a measure designed to support the hospitality industry, with biannual indexation scheduled to recommence from August 2027.
Fringe Benefits Tax (FBT)
If your employer provides non-cash benefits, think company cars, gym memberships, or entertainment, those benefits may attract FBT, which the employer pays at a flat 47 per cent on the grossed-up taxable value. It is one of the less-discussed taxes but can be significant for certain industries.
Corporate Tax
Companies pay tax at 30 per cent on their profits, or 25 per cent if they are a base rate entity with a turnover under $50 million. Multinationals and the effectiveness of the corporate tax regime have been a persistent focus of reform discussions.
――――――――――――――――――――
What’s Changing Right Now
Income Tax Cuts
The Albanese government has legislated a further round of income tax cuts that will reduce the 16 per cent tax rate (applying to income between $18,201 and $45,000) to 15 per cent from 1 July 2026, and down again to 14 per cent from 1 July 2027. Every Australian taxpayer earning above $45,000 will get an extra tax cut of $268 in 2026-27 and $536 from 2027-28, compared to 2024-25 settings.
Standard Work Deduction
From 1 July 2026, the government plans to allow eligible taxpayers to claim a flat $1,000 deduction for work-related expenses, without needing to itemise individual costs. The deduction is expected to benefit around six million Australians who currently claim less than $1,000 in work-related expenses each year.
Superannuation and the Division 296 Tax
The government has been pushing to introduce an additional 15 per cent tax on earnings from superannuation balances above $3 million. Legislation has passed the House of Representatives and is currently before the Senate, with its final form and commencement remaining uncertain. The concept of taxing unrealised gains, meaning you could be taxed on the increased value of assets you have not yet sold, has generated significant pushback, particularly from farmers and small business owners who hold property within their super funds.
――――――――――――――――――――
The Rumoured and Proposed Changes
This is where it gets interesting, and depending on your financial situation, potentially alarming.
Capital Gains Tax Reform
The CGT discount is under more scrutiny than it has faced at any point since Peter Costello introduced it. A Senate Select Committee was established in November 2025 specifically to investigate how the discount has operated and whether it deserves to continue in its current form. Among the most widely discussed proposals is cutting the discount from 50 per cent to 25 per cent for certain assets, particularly investment properties. No final policy has been legislated, but with the May 2026 federal budget approaching, the government has not categorically ruled out reform.
Treasurer Jim Chalmers has pointed to the ongoing Senate committee work and suggested the government’s focus remains on income tax cuts and better-targeted super concessions, though he has remained tight-lipped on any CGT changes.
Inheritance Tax
Australia is one of the few developed nations that does not have an inheritance or estate tax. That could change, at least if certain economists and think tanks get their way. The Australia Institute has proposed reintroducing an inheritance tax as one of three measures that could raise $70 billion per year in additional revenue, estimating it would generate $10 billion annually while reducing intergenerational inequality.
Deloitte Access Economics has also advocated for a broad-based inheritance tax of 10 per cent, with a tax-free threshold of $100,000 and an exemption for those inheriting a principal place of residence, which it projected could raise $3 billion per year on average over a decade.
The major parties have not committed to this. In fact, Labor has historically backed away from anything that sounds like a “death tax” due to its political toxicity. But with $5.4 trillion expected to transfer between generations over the next two decades, the conversation is not going away.
Wealth Tax
The Australia Institute has also floated a two per cent annual wealth tax on individuals worth more than $5 million, excluding their family home and superannuation, estimating it could raise $41 billion per year. Critics have pointed out the practical complications of taxing illiquid assets like private businesses and agricultural land, where finding the cash to pay an annual levy could be genuinely difficult.
GST Reform
Deloitte Access Economics has advocated for increasing the GST rate to 15 per cent and broadening the base to cover all foods and education, offset by significant income tax cuts and government support payments to ensure the bottom 40 per cent of households are no worse off. It estimates this package could raise an average of $90 billion per year over the next decade. It is a logical proposal in policy terms. It is also politically almost untouchable, requiring the agreement of all states and territories as well as the federal government.
Corporate Tax Reform
The Productivity Commission has recommended lowering corporate tax rates, including from 30 per cent to 20 per cent for large companies, though this would be paired with other revenue measures. Whether any government has the appetite to take on corporate tax reform while managing all the other competing pressures is another matter entirely.
――――――――――――――――――――
What Does It All Mean?
Australian tax policy is at an inflection point. The system has not had a genuine overhaul since the GST was introduced over 25 years ago, and the economic pressures are becoming harder to ignore. Housing affordability, intergenerational inequality, a structural budget deficit, and an ageing population are all pushing in the same direction, toward more revenue.
The question is where that revenue comes from. Income taxes already account for an outsized share of the government’s take compared to most comparable nations. Asset-based taxes like CGT, super concessions, and potentially inheritance levies are increasingly in the frame.
For most Australians, the immediate news is not bad. The income tax cuts are real and they are coming. But the longer-term picture is one where the tax landscape could look quite different within a decade, particularly for property investors, high-balance super holders, and those expecting to pass on significant wealth.
Worth keeping an eye on the upcoming May budget. It may be one of the more consequential ones in a long time.
