Australia's Future Tax System

Architecture of Australia's tax and transfer system

Section 4: History of Australia's Tax‑Transfer System

Outline

This section provides an overview of the development of Australia's tax‑transfer system since federation and of the shifting balance between Australian government and state revenue powers.

Key points

  • The development of the Australian tax system can be categorised into two distinct periods. In the first period, from federation to the mid‑1970s, the focus was largely on revenue adequacy to fund increasing levels of social provision of goods and services. In the second period, since the mid‑1970s, there has been a greater focus on improving the equity, efficiency and simplicity of the tax system.
  • Transfers have evolved from basic payments linked to war service and old age (with Age Pension age well above average life expectancy) to a more extensive system of social support. The principles of early pension payments set the social support scene for the future: funded from general government revenue; based on circumstances rather than past earnings; and means tested to target assistance.
  • Since federation the Australian government has been the predominant revenue raiser and revenue has been redistributed to the States.