Tax breaks for older workers flagged by Treasury Secretary Ken Henry

Treasury Secretary Ken Henry, the man in charge of the review of Australia’s tax regime, has given the strongest indication yet that he will push for changes to Australia’s personal tax system to encourage older and productive workers to stay in the labour force.

In a speech to the Australasian Tax Teachers Association, Henry said Australia’s tax revenue would need to “grow strongly in the longer term” to accommodate the growing demands of an aging population.

This will require the Government to raise taxes in certain area – mining is one sector likely to come under attack – and make changes to personal income tax rules.

“Marginal tax rates might need to be adjusted over time to ensure that they reflect the changing abilities and propensities to work of different cohorts at different times in their lives,” he said.

“Tax policy design has to recognise a growing fiscal need for encouraging highly productive workers and increasing participation by being cognisant of the costs to the community of high marginal tax rates applying to particular groups of workers.”

Tax experts have interpreted the comments as suggesting Henry will push for a reform of marginal tax rates the discourage taxpayers from returning to the workforce (such as parents who may find it more economic to remain on family tax benefits that return to work) or entering the workforce.

While there has been no indicator from Treasurer Wayne Swan when the Government might formally respond to the Henry Review, which was delivered before Christmas, it appears snippets are likely to leak out as part of an informal discussion process.

One suggestion likely to anger the business community is that of rent taxes for the mining sector, possibly to replace the current state-based royalty taxes on commodities such as coal and iron ore.

Henry used his speech to blast “sectional interests” who will no doubt oppose such measures, even if their industries can absorb them.