Tax planning in Australia’s income tax system

Has income tax become voluntary in Australia? It appears that for some, nil or very low tax bills are a real prospect. Those with flexibility over how income is earned and motivation to achieve tax savings can structure their financial affairs to channel income through a mix of companies, trusts, assets, superannuation and family members over time. This article presents some of the simpler strategies available within the Australian tax system and shows how these are available to people across the income distribution. However, a tax system designed to encourage tax planning runs counter to core principles of good tax design of fairness, efficiency and simplicity. It also raises questions about the sustainability of Australia's tax system. Addressing the structural incentives to engage in tax planning requires a wholesale rethink about the design and role of income in Australia's tax system.