Treasurer Jim Chalmers has announced a wide-ranging review of Australia’s business tax framework, signaling a significant shift in the government’s economic strategy. The move comes as Canberra attempts to balance the dual challenges of declining company tax receipts and mounting fiscal pressures tied to global volatility.
Speaking in Canberra on Wednesday, Chalmers confirmed that Treasury would conduct two separate but complementary reviews: one examining corporate tax concessions and deductions, and another focused on the treatment of multinational profits and digital services. “Our system has not kept pace with how businesses actually operate in a digital, global economy,” Chalmers said. “We need to make sure the tax base is robust, fair, and sustainable.”
The reviews will begin immediately, with interim findings due by mid-2026 and final reports expected before the 2027–28 budget. Business leaders, investors, unions, and community representatives will be invited to contribute.
Why Now? The Pressures Behind the Move
The decision to launch these reviews reflects a sharp drop in corporate tax receipts. Treasury data shows company tax collections fell by 6.3 per cent in the past financial year, the largest decline in a decade. Slower global growth, weak commodity prices, and profit-shifting by multinationals have eroded revenues.
At the same time, public spending on health, aged care, and defence has surged. Independent forecasts suggest net debt will reach 34 per cent of GDP by 2028 without corrective action. Chalmers stressed that the reviews are not about “raising taxes by stealth” but about “closing loopholes and modernising outdated rules.”
Economic think tanks have also warned that Australia risks falling behind OECD peers. The OECD’s 2024 corporate tax survey ranked Australia 23rd out of 38 member states for efficiency and neutrality, highlighting distortions caused by overlapping concessions.
Business Concessions in the Spotlight
The first review will scrutinise the $60 billion in annual business tax concessions, which range from accelerated depreciation schedules to industry-specific offsets.
Economists argue that many of these concessions no longer deliver measurable benefits. For example, the Petroleum Resource Rent Tax has been widely criticised for allowing gas giants to delay payments for decades. A Grattan Institute study found that small business concessions alone cost the budget $20 billion annually, yet had little effect on long-term productivity.
The review will examine whether such concessions should be retained, redesigned, or phased out. The government has promised a “principled approach” that weighs fiscal sustainability against the need to encourage investment.
Multinational Profit Shifting and Digital Taxation
The second review will focus on the taxation of multinational companies, particularly those in the digital economy. Australia currently loses an estimated $4.5 billion a year to profit-shifting, according to Treasury estimates.
Chalmers said that aligning domestic rules with the OECD’s “Pillar Two” framework, which imposes a 15 per cent global minimum corporate tax, would be a priority. The review will also assess whether Australia should introduce a targeted digital services tax if global negotiations stall.
Tax experts say this could bring companies like Google, Meta, and Amazon more squarely into the local tax net. “The digital economy has exploded, but our tax code is still written for an era when profits were tied to physical assets,” said Professor Miranda Stewart from Melbourne Law School.
Industry Reactions
The business community’s response has been cautious but not hostile. The Business Council of Australia (BCA) welcomed the reviews but warned against any changes that could “undermine competitiveness.” BCA chief executive Bran Black said: “We support integrity measures, but we cannot afford to send a signal that Australia is closed for business.”
Small business groups have also expressed concern that reforms might cut into already thin margins. However, they welcomed the chance to streamline what many describe as an overly complex system. “Clarity and fairness are just as important as revenue,” said Council of Small Business chair Matthew Addison.
Unions, by contrast, have praised the move as long overdue. The Australian Council of Trade Unions said multinationals had “avoided their fair share for too long” and called for strict enforcement of new rules.
Political Stakes
The reviews will also test the Albanese government’s political capital. Business tax reform has derailed previous administrations, with both Labor and Coalition governments struggling to push through major changes.
Prime Minister Anthony Albanese has backed the initiative, framing it as part of a broader agenda to restore trust in government. But opposition leader Peter Dutton has already signaled resistance, claiming the reviews are “a stalking horse for higher taxes.”
The political contest is likely to intensify as the reviews progress. Analysts note that tax reform is always a high-stakes game in Australia, where memories of the mining tax and carbon tax still shape voter sentiment.
International Context
Globally, governments are reassessing corporate tax regimes amid slowing growth and ballooning debt. The Biden administration has pushed for tougher rules on multinationals, while the European Union has pressed ahead with digital levies.
Australia’s reviews align with this trend but must also reflect local conditions, particularly the economy’s heavy reliance on resource exports. “It’s about finding a balance,” said former Treasury secretary Ken Henry. “We need a system that raises adequate revenue without stifling growth.”
What Comes Next
Treasury will release discussion papers in early 2026 outlining key issues and reform options. Stakeholder consultations will run throughout the year, with roundtables in major cities and online submissions open to the public.
Chalmers has promised that no changes will be rushed. “We know how disruptive uncertainty can be,” he said. “This is about a careful, methodical process that takes everyone along with us.”
The government is also expected to commission independent modelling to assess the economic impact of different policy options. This will include analysis of productivity, investment, and employment outcomes.
Implications for Investors and Businesses
For investors, the reviews create both risks and opportunities. Companies heavily reliant on concessions may face higher effective tax rates in the future. At the same time, a more predictable and internationally aligned system could enhance Australia’s attractiveness as an investment destination.
Tax advisors are already warning clients to prepare for possible changes in depreciation rules, loss carry-forward provisions, and thin capitalisation limits. “It’s about scenario planning,” said Deloitte tax partner Chris Richardson. “Businesses need to map out what their balance sheets would look like under different tax settings.”
The Road Ahead
The path to reform will not be easy. The reviews touch on powerful interests, from mining companies to tech giants, and the political climate is highly charged. Yet there is broad recognition that the status quo is unsustainable.
Chalmers, who has long argued for structural budget repair, appears determined to seize the moment. “We can’t keep patching up a system that is no longer fit for purpose,” he said. “If we want strong public services and sustainable growth, we need to get this right.”
The reviews could reshape Australia’s tax landscape for decades. Whether they succeed will depend on the government’s ability to balance competing demands, navigate political opposition, and deliver a package that is both fair and economically sound.
For now, the Treasurer has set the stage for one of the most consequential policy debates in recent years—a debate that will test not only the resilience of Australia’s fiscal system but also the strength of its political leadership.
