Australia Weighs $2,700 Tax Cut in Reform Plan

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Australia is considering a major economic reform proposal, with economist Chris Murphy outlining a plan to provide income tax relief while restructuring the tax base. The proposal, released this week, has prompted discussion across government, business, and households about its potential economic impact.

Murphy’s plan proposes an average income tax cut of approximately $2,700 per worker per year. To offset the reduction in revenue, the plan recommends broadening the Goods and Services Tax (GST), replacing state-based stamp duties with a broad land tax, and applying higher tax rates on corporate superprofits.

According to Murphy’s modelling, the reforms could increase real GDP by 6%, raise business investment by 11%, and expand housing supply by 8% over the next decade. The proposal is structured to maintain overall government revenue while shifting the tax burden toward consumption and land-based taxes rather than income.

Balancing Revenue and Tax Relief

Australia’s current tax system relies heavily on income taxes, while stamp duties on property transactions are considered economically distortive. Replacing stamp duty with a land tax aims to improve housing mobility and provide a recurring revenue stream for state governments. Broadening the GST base is intended to stabilize revenue collection as income tax rates are reduced.

The proposal also suggests targeting corporate superprofits from concentrated industries, such as banking and resources, through higher tax rates to capture excess earnings.

Responses and Implementation Considerations

Business groups have noted the potential for pro-growth effects, while housing advocates have highlighted that replacing stamp duties could improve market liquidity. Questions remain regarding the effects of a broader GST on different income groups, as consumption taxes tend to affect lower-income households proportionally more.

The federal government has not formally adopted the proposal. Treasury officials are expected to review the modelling and consider policy options as part of ongoing economic planning discussions.

Long-Term Implications

Murphy’s analysis indicates that the reforms could provide structural benefits, including higher investment, improved productivity, and increased housing availability. The land tax component is designed to replace one-off transaction taxes with a stable, recurring revenue source, potentially supporting infrastructure funding and state budget planning.