The big tax theory: How Australia’s system went bang

If you were to put the story of Australia's tax system into a song, you might turn to the Big Bang Theory theme. And it might begin like this: 

"Our whole economy was in a hot dense state, then the tax code started to complicate. Rates began to rise, the red and green tape forms began to grow, and new levies and duties were in a constant flow. 

Personal income tax took its place, and corporate tax joined the race. GST on goods and services, too. A Medicare levy just for you. Capital gains tax on unsold assets..."

But of course, there are too many taxes to continue, as the original song just isn't that long. At last count, there were almost 125 distinct taxes in Australia. 

Now in 2025, as inflation bites deeper, a record number of Australians hold two or more jobs to make ends meet. That means the Australian battlers and the forgotten people are paying more tax than ever.

The most alarming development in the evolution of our tax system is the Labor Party’s proposed plan to introduce a tax on unrealised gains within your superannuation. It's effectively a tax on profits you haven’t received and may never receive. Not only is it un-Australian, but it also goes against every modern accountancy principle.

The financial services sector has warned that if such a policy was successfully introduced on unrealised capital gains within your super, it could open the flood gate to the same principle being applied to other unrealised gains. For example, imagine each year having to pay capital gains tax if your properties estimated value increased, even though you hadn’t sold the property and didn’t have the current financial means to pay your tax bill. 

For a government that seems determined to find new honey pots, this idea fails both the pub test and basic economics.

On first principle, there is no actual benefit generated, with gains only ever existing on paper. The question is how are governments going to compensate tax payers in the bad times? In fact, to make this poorly thought-out tax worse, the government has stated that under its policy, superannuation holders would be unlikely to be able to claim a tax offset in any year where the ‘paper value’ of their super decreases.

History and supply-side economics tell us that although governments have higher tax rates, it doesn't automatically translate into higher revenue; it instead slows investment and shrinks the tax base, leading to a diminishing return on the government's new shiny tax.   

Labor will argue that their current plan will only impact a very small percentage of the population but have neglected to mention that they have no plan to index the threshold for when it will be applied. Many economists are warning it will impact the majority of taxpayers by the time they reach retirement age. 

We urge voters this election to consider the broader, less spoken about policies when casting their ballot. Labor’s campaign silence about polices which will have a ‘Big Bang’ impact on unsuspecting voters and the broader economy are of major concern.