Australians could face sweeping tax changes after the International Monetary Fund urged Treasurer Jim Chalmers to pursue major reforms in the May budget.
While the IMF said Australia emerged from 2025 in better shape than expected, it warned deeper structural reforms can no longer be delayed.
The IMF called for the 10 per cent GST to be increased and for exemptions on items such as financial services, fresh food and education to be removed, which it said would allow states to scrap stamp duty on property purchases.
It also called for company tax rates to be cut, higher taxes on resource companies, and the removal of some tax breaks, including the capital gains tax discount.
‘A high reliance on direct taxes and a relatively high effective cost of capital hinders investment and productivity growth and suggest there is scope for tax reform,’ it said.
‘A comprehensive reform package should aim at improving the efficiency, equity and sustainability of the tax system.
‘Tax breaks, including superannuation concessions and capital gains tax discount, could be phased out to generate a more equitable and efficient tax system.’
The report also called for tighter federal-state cooperation on infrastructure to rein in escalating project costs, echoing arrangements seen decades ago where Canberra had more control over state budgets.
Jim Chalmers is tipped to announce a reduction of the 50 per cent concession for capital gains tax
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The fund believes inflation will gradually fall from 3.4 per cent this year to 2.7 per cent in 2027.
The report praised the handling of Australia’s economy during difficult conditions as inflation pressures return.
‘They commend Australia’s robust institutions, flexible markets, agile policy toolkit and flexible exchange rate, which position the country to manage external risks from trade policy uncertainties and tighter global financial conditions.’
Treasurer Jim Chalmers has indicated the federal budget on May 12 will include spending cuts and tax reform, and he is expected to announce a reduction in the 50 per cent concession for capital gains tax.
Despite the praise in the fund’s report, Chalmers said more work needed to be done.
‘There are some ideas in these reports that we agree with, some that we don’t, that we won’t be picking up and running with,’ Chalmers told ABC radio.
‘But overwhelmingly, this IMF report was a very positive report about Australia and about the government’s economic plan.’
