Coalition’s election policies a lost opportunity to deliver substantial reform: RSM

Professional services firm RSM Australia has said the election policies unveiled by both major parties in recent weeks have been focused on short-term relief issues rather than serious reforms that would sustainably lift the Australian economy.

Labor's federal budget, which unveiled measures such as the personal income tax cuts and an additional $150 energy bill rebate, fell far short of the meaningful tax reform that Australian businesses had hoped for.

The Coalition's budget reply on Thursday night was similarly focused on short-term measures such as the cutting the fuel excise in half for one year.

Liam Telford, national tax technical director at RSM, said this was a missed opportunity for the Coalition to offer policy proposals that would deliver more meaningful reform that addressed some of the structural challenges facing Australia.

"I think it would have been a good opportunity for the Coalition to announce or propose something more holistic, which is what everyone has been crying out for for years," Telford said.

He noted that Treasury released a tax white paper back in 2015 under the previous Coalition government which was intended to explore tax reform across the whole tax system and offer policy proposals.

The tax white paper consultation failed to progress any further following a leadership change within the Coalition party.

Telford said the tax white paper highlighted how tax reform could provide an opportunity to unleash Australia's full economic potential.

"A decade has passed since the white paper was released and nothing has happened."

He stressed that there was a whole range of areas where Australia desperately required major tax reform.

With the ratio of the working population to those age 65 and over forecast to drop significantly by 2055, Telford said there would be a decrease in the number of those paying personal income tax and pressure on the tax system to fund services.

"I think that underscores the need to look at perhaps GST reform in terms of potentially broadening the base and, more importantly, an increased GST rate."

Australia's GST rate was well below the OECD average which was 19.3 per cent as of 31 December 2024.

"Any measures to broaden the base and increase the rate would need to be accompanied by appropriate compensation to protect lower socio economic demographics through changes to personal income tax," Telford said.

Australia also had a lot of outdated thresholds in tax law that were not indexed, including the small business CGT thresholds, which have not been updated for close to two decades, he added.

“The complexities within and limitations of the current small business capital gains tax system make it well overdue for a shake-up in the future."

He also said Australia's corporate tax was high and bifurcated between base rate entities and non-base rate entities, which could lead to inefficiencies.

"I think just bringing that rate down for all corporate tax entities is going to allow Australian businesses to compete more effectively with foreign multinationals."

There were also issues with research and development (R&D) tax incentives that needed to be reviewed to help drive innovation, Telford added.