There is growing concern that Australia’s tax and transfer system disproportionately benefits older, wealthier retirees while placing a rising burden on younger workers—a tension now central to Treasurer Jim Chalmers’ pre‑budget messaging.
A retired bank economist, Jeff Oughton, expressed disbelief that young Australians aren’t “marching in the streets”, arguing that wealthy retirees like him pay effectively zero tax. In contrast, younger generations face high income taxes, stagnant wages, and soaring public debt.
“Rich people like me who stopped working at 53 and have been wandering the world travelling and volunteering, their tax rates in retirement are effectively zero”, Oughton said.
“But all the young people have an intergenerational shit sandwich”.
Economists such as Ken Henry and Teal MP Allegra Spender argue that the share of over‑65s paying income tax has fallen from 27% to 17%.
Retirees can hold up to $2 million in tax‑free super, plus special senior tax offsets.
A self-funded retiree couple can have $4 million in super, unlimited home equity, and $60,000 in outside income — and still pay zero income tax.
Meanwhile, older Australians rely heavily on taxpayer-funded healthcare, aged care, and other services.
ANU research shows that over‑60s now have incomes that are 95% of working‑age Australians, up from 61% in the 1990s.
Over‑60s also earn 160% more than 18–30‑year‑olds, fuelling claims of intergenerational inequity.
“It’s kind of perverse that we’re subsidising people to amass large amounts of wealth to pass on to their children tax-free, and taking it away from working wage and salary earners through income tax”, ANU Tax and Transfer Policy Institute director Robert Breunig said.
A two-sided problem:
Australia’s heavy reliance on income tax is one side of the problem.
Australia relies more on income tax than most countries because its GST is only 10%, far below European consumption taxes (~20%). Other tax bases are shrinking, including the fuel excise (driven by the EV transition), the tobacco excise (driven by illegal smokes and vapes), and the alcohol excise (younger people drink less).
Former Treasury officials noted that the top 5% of taxpayers pay 37% of all income tax, while the top 15% pay 57%.
The top tax bracket of $190,000 has also barely moved since 2008, and bracket creep has pushed more workers into higher tax bands.
The other side of the problem is Australia’s ageing population, driven in part by the retirement of the baby boomer bulge.
As a result, the nation’s tax burden is increasingly falling on the relatively shrinking pool of workers, rather than being spread more broadly.
Australia’s tax system increasingly shields wealthy retirees while relying heavily on younger workers to fund government services and rising public debt.
The Treasury’s Intergenerational Report projected that personal income tax revenue would rise from around 53% of total taxes currently to more than 58% in 2062-63 without tax reform.
Even worse, as the population ages, a smaller workforce will be responsible for paying higher personal income taxes.
Australia needs broad-based tax reform:
The Australian tax system’s reliance on fewer people paying income tax is clearly unsustainable, wasteful, and unfair.
This is especially true given that the elderly population is growing and paying lower taxes than ever before, despite controlling the majority of the country’s wealth.
Australia needs comprehensive tax reform that shifts the tax base away from productive activities (taxing individuals) and towards more efficient sources such as resources, land, and consumption.
Inefficient and inequitable tax concessions also need to be closed.
Moving the tax base away from personal income taxes would also diminish the need for large-scale immigration to raise federal income tax revenue.
The 2010 Henry Tax Review already provides the reform blueprint and only needs updating.
Australia cannot afford to delay fundamental tax reform for another decade. This would jeopardise workers, intergenerational equity, and the nation’s productivity.
