Abstract

This paper presents the cumulative results from modelling of the distributional impact of changes to the personal income tax and social security system in Australia over the period 2005-06 to 2015-16 and planned changes to 2020-21. For much of the first period, successive governments implemented changes that resulted in significant personal income tax cuts and for many groups increased social security payments. With the end of the mining boom and the lingering effects of the Global Financial Crisis (GFC) the Federal Budget moved into deficit. To bring the budget back into balance, successive governments have attempted to make budget savings through cuts to welfare programs. The 2017-18 Commonwealth Budget increases taxes directly and indirectly through the effects of bracket creep.

This paper first considers the period 2005-06 and 2015-16, a time where policy changes were broadly in the direction of lower taxes and higher welfare payments. The paper then considers the years since 2015-16 (including projections to 2020-21) where policy has taken a strong shift towards increased taxation and lower welfare payments.

We use ANU’s recently developed microsimulation model of the Australian Tax and Transfer system PolicyMod to estimate the impact on households and the Commonwealth Budget of all of the major changes in legislation in this area and to develop estimates of the total impact on different household and income level types.

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