Rob Heferen, Commissioner of Taxation
Melbourne 15 May 2026
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Introduction
Thanks Neil, and good evening, everyone.
Thank you to the Law Council for the invitation and for the chance to speak in a setting where tax, law, and hopefully dinners coexist so comfortably.
I’d like to acknowledge the Traditional Owners of the land that we meet on, the Wurundjeri and Bunurong Peoples here in Melbourne. I pay my respects to elders past and present, and extend that respect to any First Nations people here today.
I can see from the agenda that it’s been a pretty heavy workshop so far, so hopefully my comments can provide a more relaxed and cursory examination of our fascinating topic, but also give you a few things to mull over.
Also, hopefully, some provocation. Tax reform, after all, is usually quite contested.
I’ve had the privilege of being involved in a number of tax reform exercises, and hopefully can bring a perspective on what it looks like from the inside; how it’s conceived, how it’s implemented, where it wobbles, and what it teaches us about the role of law, administration, and trust in the system (and indeed public policy more broadly).
I’m one of those unusual creatures that is fascinated by tax and tax reform – the economics, the psychology and the way it is put into place. To me, tax is a key part of the social contract, and without it I am sure we would end up in that Hobbsien nightmare of ‘the life of man, solitary, poor, nasty, brutish and short.’
So tax is what sustains us as a society, and tax reform is how to make it better.
If I sound a bit like a fanatic, please excuse me – for better or for worse, tax reform in one way or another is something I’ve spent the majority of my working life on, and so I do care deeply about it!
During that time, I’ve been involved in many losses, and a few wins. Far more losses than wins. A bit like being a Collingwood supporter (which I am) through those grand finals in the late 70s and early 80s – 5 in 5 years and not one premiership. Still – it taught one resilience, a very useful trait when dealing with tax.
Collingwood has been a life-long interest but public service has been my life-long passion. Incidentally, there was a time where I thought my career would be in law. A high school counsellor once recommended I become a lawyer or doctor. But, while studying law and philosophy at uni I realised that I lived for the abstract, but the concrete eluded me. So for most of my working life I’ve been attracted to thinking about all manner of things in the abstract:
- what constitutes a just society
- what constitutes an ideal tax system
- what do we mean by fairness, and
- at 5ft 11, was Rene Kink ever tall enough to be a genuine centre-half forward.
Tonight, I want to reflect on how major tax reform in Australia has actually unfolded – not as a single moment of insight or leadership, but as a series of decisions shaped by crisis, politics, public economics, law, and administration:
- Given my statutory role, I’ll start by first outlining some developments at the ATO.
- I then want to outline the economic consensus of what constitutes the aims of tax reform.
- And then step through Australia’s more recent history, at least post-World War II, and finish with some thoughts about the future - including how the recent budget reforms will reinforce equity in the system.
So, before going down the path of tax reform over the last 50 years or so, I think it’s important to understand where we in the ATO are currently positioned, as the government’s principal tax collector.
When I commenced as Commissioner in March 2024, it quickly became clear to me that the ATO was a high performing agency, powered by dedicated and highly skilled people.
It had been more than 25 years since I last worked here, but throughout that time I’d seen – both firsthand and from outside – the way the ATO consistently rises to meet the needs of government and the Australian community.
Just prior to and then during COVID, the ATO had become markedly more agile in how it administers the tax system.
But one of the challenges we faced was our core purpose possibly being diluted. More and more payments were being missed by taxpayers and debt to the Government was growing.
That’s why last year the Executive and I took the opportunity to refresh our purpose and vision – to sharpen our focus on what really matters. As Stephen Covey says: the main thing is to keep the main thing the main thing.
And what’s our main thing? At our core we are a tax collector. So our purpose is simple, 'We collect tax so government can deliver services for the Australian community'. Everything we do should support that core role.
When we do it well, we move closer to our vision – an Australia where taxpayers meet their obligations because:
- complying is easy
- help is tailored, and
- deliberate non-compliance has consequences.
But we’re not just tax collectors; we’re stewards of a system that underpins a properly funded, properly functioning society. Without a stable tax base, government will find it increasingly hard to function.
An APS review last year confirmed the ATO is a high performing agency – thanks to our people – but it also showed where we can do better.
The insights in that Capability Review led to Our Performance Evolution: building on our strengths, lifting capability, and aligning our efforts so we’re ready for today’s priorities and tomorrow’s challenges – thinking bigger, acting bolder, and delivering together.
And flowing from that, we’re setting a clear, enterprise wide ATO Strategy to guide our direction and decisions over the next few years.
The ATO is set up well to implement the Government’s recently announced tax reform package.
The aim of reform
So, what constitutes tax reform?
The standard public finance literature maybe first articulated by Peggy and Richard Musgrave (in fact arguably from Adam Smith himself), will have reform being changes that help the tax system be more efficient, equitable and simpler.
An efficient system will minimise the number of decisions that consumers and businesses change due to the relative price changes that the tax brings. An equitable system is one that is fair. And a simple system is one that is easily understood.
Of course, these seemingly straightforward labels can be quite tricky. I won’t bore people too much with the various meanings of economic efficiency.
But I will expand a bit on ‘fairness.’ Fairness, of course, isn’t a single concept. It operates at a number of levels, and for my current purposes, at least 3. There’s horizontal equity – the idea that people in similar economic circumstances should be treated the same.
There’s vertical equity – that those with greater capacity should contribute proportionately more.
Finally, there’s intergenerational equity – the question of whether today’s settings place a disproportionate burden on future taxpayers.
That’s the standard public economics theory. But the big difference between economists in academia and those in government, is that in government the number one criteria by the proverbial country mile, is revenue adequacy. That is, is the government getting enough cash.
Accordingly, tax reform should equate to ensuring the tax law raises the revenue the government needs to deliver the services the community demands, at the lowest cost possible, ensuring the community both understand the system and see it as fair.
This is not a new concept. King Louis XIV’s Finance Minister, Jean-Baptiste Colbert, described taxation as 'the art of plucking the goose to obtain the most feathers with the least hissing.'
In modern terms, Colbert’s 'plucking the goose' analogy is a reminder that raising revenue is about collecting the right amount in a way that sustains community trust and voluntary compliance. If too much is extracted, it can drive disengagement or non-compliance.
In other words, it’s not just about tax design, but about doing it in a way the system can carry, without undermining trust, compliance, or economic activity.
But I would like to venture, that for Australia, fairness or equity dominates.
I’d now like to turn to Australia’s experience, particularly in the more recent period.
Australia’s history of grappling with tax reform has been somewhat torturous.
Looking back to the 1930’s, our tax system was decentralised and duplicative. Both the federal government and the state governments imposed income tax, customs duties were still crucial, and taxation touched far fewer Australians than it does today.
War shook the system, and in 1942, the Commonwealth introduced uniform income tax to fund the war, forcing the states out of income tax via legislation and grants.
Although politically framed as a temporary war time measure, states never took back income‑tax powers after 1945 – even though they had a crack at convincing the High Court they should, first during the war, and again in 1957 – and the ‘new normal’ became the foundation of Australia’s modern tax system.
Post‑war Australia moved to a centralised, federally dominated tax system that relied less on state governments raising revenue, and was designed to fund reconstruction, full employment, and a growing welfare state.
Decades passed, and structural problems in the new system began emerging. Income tax (and income tax very narrowly defined) was carrying a significant amount of the revenue burden.
By the 1970s, it was clear that reform was long overdue. In 1970–71, the top marginal tax rate was 64%, the corporate tax rate was 47.5%. We were operating in a classical system with the attendant double taxation and there was a growing sense that this was not a sustainable system.
This led to Treasurer Snedden in April 1972 commissioning Justice Ken Asprey, (accompanied by Sir Peter Lloyd, Professor Ross Parsons and Ken Wood, and later assisted by David Bensusan-Butt) to do a comprehensive review of Australia’s tax system.
Asprey Taxation Review
Before Asprey, the system drew sharp lines that didn’t reflect real life – cash wages were taxed, most capital gains weren’t, nor were non‑cash benefits. That disconnect created outcomes people could see and feel as unfair, even if they couldn’t quite explain why. And mistrust in the system leads to greater mistrust.
As economic pressures mounted in the 1970s due to inflation, the oil crisis, and government instability, that misalignment within the tax system increasingly showed up in the law. We saw gaps emerge, boundaries of the system tested, and legal disputes multiply.
For Australian purposes, Asprey was probably the first that articulated the need for a tax system to be efficient, fair and simple.
Some economists think efficiency is the most important element, that is, the best tax system is the one that interferes least with economic decision making.
Indeed, I once held that view. Afterall, increased efficiency will lead to higher productivity and the overall economic gains will enable all boats to be lifted so they say. But I now know better.
Efficiency’s primacy was once tested in practice by Prime Minister Thatcher’s ‘Poll Tax’ in the late 1980’s – a flat, per-person charge on individuals regardless of income or means.
It was efficient and simple, but it failed on fairness. It was profoundly vertically inequitable.
The result was widespread resistance, non‑compliance, and ultimately a loss of legitimacy in the system. The tax became politically untenable and quickly repealed, and was arguably a factor in the PM’s resignation.
It’s a useful reminder that even if a tax meets one or two of the criteria, if it falls too far out of balance – particularly on fairness – the system will push back.
Despite the analytical strength of the Asprey Review, timing is everything. By the time the review was finalised, the Government had changed, so when Treasurer Hayden received the Review, he was not in a position to push forward on the proposed changes.
Instead, tax reform entered a prolonged period of delay and inactivity, in what I would label our broad equivalent of a ‘winter of discontent’.
Except that it spanned many, many winters!
For the next decade, many of the issues Asprey identified simply persisted.
The system didn’t reset; the pressure built. And was arguably further pressurised by a High Court willing to find against the Commissioner in a series of seminal tax avoidance cases (or tax planning cases, depending on your perspective).
As tax historian and my former colleague, Paul Tilley noted, the Asprey Review is Australia’s most important and influential tax review and laid important foundations for future reform processes.
Reform of the Tax System (RATS)
Finally, the Hawke Government, confronting the challenges of our deteriorating tax system, took up the challenge. It released the Draft White Paper, and then pushed ahead with the Reform of the Tax System (or RATS), translating at least some of the conceptual framework set out by Asprey into law.
Where Asprey diagnosed the structural problem, RATS showed the practical side. It demonstrated something Asprey anticipated but couldn’t control – reform happens when ideas are ready, institutions are capable, and the moment aligns.
Our system was reformed:
- capital gains were brought into the income tax base and fringe benefits were taxed – both addressed horizontal equity
- dividend imputation replaced double taxation of company profits – a key efficiency measure
- foreign tax credits aligned our system internationally, and
- personal rates were lowered, supported by a broader base.
As a package these measures improved both efficiency and equity. Simplicity, unfortunately, was put on the backburner.
I think it is instructive to recall that the two most controversial measures, taxing capital gains and fringe benefits, were rigorously contested but the court of public opinion ruled that due to fairness they would need to be part of our system.
A New Tax System (ANTS) and implementing the GST
Before I go any further, I should acknowledge the unfortunate naming conventions here. RATS followed by A New Tax System, affectionately referred to as ANTS, makes this sound more like a biology experiment than tax reform.
Names aside, Asprey to RATS to ANTS are not 3 separate stories, it is a single reform arc, gradually moving the system closer to how the economy actually works.
This is where I enter the picture. Still a young, optimistic – if a little naïve – public servant. As I entered Treasury from the ATO, the Howard government was seeing that:
- Our tax base was narrowing.
- The system was still too complex.
- There was an over-reliance on personal income tax and fiscal drag or bracket creep.
- And the company tax rate (at 36%) was too high and out of line with international good practice.
What eventually followed was the ANTS package including the GST, substantial personal tax cuts, and a significant reform to the payment system.
From the inside, it was an enormous task.
I was fortunate to be one of a small number of ATO staff seconded to the ‘secret bunker’ in Canberra to assist the key development team, led by Dr Ken Henry.
As we worked through the latter half of 1997 and into 1998 the content of the overall package took shape. The GST design was a huge focus. Following the 1998 election the legislative and administrative design went into full swing.
Culminating on Saturday 1 July 2000, when the price of approximately 3 billion products changed overnight, with Coles and Woolworths alone updating the price for 50 million products. And significant personal tax cuts were implemented for working Australians.
By international standards, it worked remarkably well.
Not because it was simple (it wasn’t). But because enormous attention was paid to certainty, guidance, sequencing, and administration.
The ATO staffed up to ensure delivery. And deliver we did.
Law professionals played a central role here. So did accountants, software developers and educators.
The GST succeeded because it gave everyone a workable path to compliance, aided by fundamental reforms to the payment system.
And it’s easy to forget the payment system reform. Provisional tax went. As did the PPS and the RPS. In came PAYGI and PAYGW to broaden out PAYE. These changes, together with the GST, furthered the shift of a system that has payments moving closer to the economic activity.
It also set the clearest markers so far of the key pillars of compliance – registering, lodging, reporting and paying.
It’s also worth recalling that like RATS, the package was vigorously contested and required significant policy change to become law.
But it’s hard to imagine us going back.
The Henry Review: stepping back to see the system
Fast forward nearly a decade to 2008 and the Rudd Government’s announcement of Australia’s Future Tax System Review (or, the Henry Review, after it’s Chair, Dr Ken Henry), whose Secretariat I was privileged to lead at Treasury.
The Henry Review was shaped by the conditions of the mining boom, which sharpened questions about how the tax system dealt with windfall profits. But then, of course, the Global Financial Crisis hit at the end of 2008.
The deteriorating economic environment meant that the Review focussed on articulating a tax structure that would position Australia well over the following 40 years, to deal with its social, economic, and environmental challenges and enhance its economic wellbeing long-term.
On reflection, I don’t think we anticipated the effects of a pandemic that would turn the economy on its head, but the principles remain sound today, at least in my opinion.
Revenue raising should be concentrated on four robust and efficient tax bases:
- personal income, assessed on a more comprehensive base and which will always be the system’s workhorse
- business income, with more growth-oriented rates and base
- private consumption, through broad, simple taxes, and
- economic rents from natural resources and land.
Whilst a surprisingly high number of the 138 recommendations either have been or are being proposed to be put in place, clearly a number have not found their way into today’s system.
The present moment and the future
But in between ANTS and Henry the seeds were sown for what might be the most important long run reform for the system. E-Tax.
It was the first step to move the annual personal tax return away from paper to digital. It began in 1999 and was supercharged through the 2010s (becoming myTax) to radically reshape the imposition on individuals when we do our tax.
In the late 90s – in the days of 'Tax Pack' – it could take a salary and wage earner with simple tax affairs up to 9.5 hours to complete a tax return. Scroll forward and now it takes a taxpayer in similar circumstances around 8 minutes on the ATO App or through MyGov.
How?
Essentially adding to our 4 pillars of compliance a fifth pillar – third party data – as well as extensive pre-filling.
The challenge now is how much of this can be extended into businesses to dramatically reduce the time it takes to comply with their tax obligations. Because if we can, this would be tax reform at its best – more economically efficient, and much, much simpler but without changing the fairness of the current system.
As you all know, the Federal Budget was handed down this week. As the administrator, our role is to work in conjunction with Treasury to ensure these important measures are implemented in a practical sense and are effectively communicated to taxpayers.
In this Budget, it seems clear the Government is looking to reinforce horizontal equity and fairness between generations.
The announced measures are intended to:
- help workers
- create a fairer housing market, and
- drive productive investment across our economy.
This includes changes to capital gains tax, compounded by those to negative gearing to support intergenerational equity, and fairer tax arrangements for discretionary trusts, creating more equal treatment between people who earn a living from wages and people with income from trusts.
This budget has pushed forward the idea of efficiency and fairness in the system, particularly intergenerational equity.
Successful reform
So, what does it take for tax reform to occur?
I mentioned earlier that reform happens when ideas are ready, institutions are capable and the moment aligns. Another way of putting this is when we have:
- a policy department on song
- a strong and capable administrator
- but most importantly, the right political drive for change.
Closing
If there is a common thread through the reforms I’ve mentioned here tonight, it’s that successful tax reform is less about brilliance at the moment of announcement, and more about discipline over time. And taking opportunities when they arise.
Asprey taught us the importance of a sound theoretical framing. RATS taught us about making reform practical, ANTS reinforced the need for the administration to work hand in hand with the political and policy drivers. The Henry Review taught us to think systemically.
But let’s always remember: tax reform is rarely tidy.
It is often imperfect.
And it is always contested – especially when the ideas are big.
But those of us who work in and around the system - administrators, policymakers, law professionals - have a shared responsibility to ensure that reform and its implementation is not just bold, but designed to work for the people it affects, Australian taxpayers.
I’m sure I speak for many when I say we don’t want a life that is solitary, poor, nasty, brutish and short but rather one of happiness, comfort and where we all can seek to live lives we have reason to value.
Thank you.
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Rob Heferen, Commissioner of Taxation (JPG, 1.8MB)This link will download a file