Treasurer Jim Chalmers rebuffs calls to increase GST and bring back inheritance tax after OECD recommendation

Treasurer Jim Chalmers is resisting calls to revive an inheritance tax and raise the GST after the OECD called for the consumption tax to be increased or broadened to raise more revenue during a time of Budget deficits and spiralling NDIS costs.

The Paris-based Organisation for Economic Co-operation and Development, headed by former Australian Liberal finance minister Mathias Cormann, noted Australia was one of the few rich-world nations that didn’t have death duties.

“I think, as always, with these kind of reports, there are some recommendations which are consistent with the Government’s direction and some which aren’t,” Dr Chalmers told reporters in Canberra on Thursday.

“The Government won’t be pursuing or implementing an inheritance tax for example.”

Neither side of politics in Australia has supported reintroducing an inheritance tax, since it was scrapped at a Federal level in 1979. This was after several states followed the lead of Queensland premier Joh Bjelke-Petersen in killing off his State’s death duties.

The OECD regarded this as unusual, with not even the hard-left Greens now campaigning for a death tax.

“Australia does not have an inheritance tax, although capital gains are generally taxed at death. Most OECD countries have an inheritance tax,” the OECD said in its new report on Australia.

“These typically include favourable treatment for close relatives, exclude the primary residence and set high wealth thresholds.

“However, as an increasing number of people have significant assets and given a high level of wealth inequality, this can be an efficient and fair way of raising revenue.”

Dr Chalmers also resisted a call to increase the Goods and Services Tax from the existing level of 10 per cent.

“We said we’re not looking to increase the GST, for example, that’s a perennial in those sorts of reports,” he said.

Since the GST debuted in July 2000, items like fresh fruit and vegetables and bread have been exempt under a deal reached between former prime minister John Howard’s Coalition government and the Democrats in the Senate. Tampons and period pads joined the exemption list in January 2019.

But the OECD argued the tax could be broadened to raise more revenue, or increased. New Zealand increased its GST to 15 per cent from 12.5 per cent in October 2010.

“Broaden the base of the Goods and Services Tax by reducing exemptions and consider increasing the rate, while at the same time reducing reliance on taxes on labour,” it said.

“The tax system is heavily reliant on labour taxes, while making less use of more efficient consumption, property and environmental taxes.

“The tax system should be rebalanced away from labour taxes by raising Goods and Services Tax rates and making greater use of property and environmental taxes, while easing the burden of income taxes.”

Dr Chalmers argued the Federal Government was cutting income taxes, with Labor re-elected in a landslide in May last year after the Coalition opposed relief for low-income workers.

“It does talk about cutting income taxes and we’ll be cutting income taxes this year and next year as well,” he said.

The lowest taxpaying workers, earning between $18,200 and $45,000, will see their marginal rate fall to 15 per cent in July 2026 and 14 per cent in July 2027, from the existing rate of 16 per cent.

With Treasury forecasting more Budget deficits in coming years, the OECD said more needed to be done to cut the growing costs of the National Disability Insurance Scheme, which is expected to cost $46 billion in 2025-26 or 1.5 per cent of gross domestic product.

“Meeting the spending plans will notably include reining in spending on the NDIS, and whose growth has averaged over 20 per cent a year over the past five years,” it said.

The OECD noted the Federal Government was aiming to pare annual growth to 8 per cent from July 2026 by removing some autistic children from the scheme.

“Reforms are needed to achieve this. While revenue outcomes in recent years have been supported by higher-than-expected commodity prices, spending pressures have been strong in the areas of health and welfare, including the National Disability Insurance Scheme (NDIS), and an increase in interest costs,” it said.

Economist Chris Richardson, who previously worked at Treasury, noted projected Government spending was likely to be $47.8 billion higher for 2025-26, than announced in the pre-election March Budget.

“That is the equivalent of doubling last year’s NDIS costs. We’re talking really big bucks here,” he said on LinkedIn on Thursday, referencing the Mid-Year Economic and Fiscal Outlook’s updated forecasts released in December.

“The extra $47.8 billion that we’re spending is simply because existing policies are now expected to be more expensive than earlier thought.”