Not necessarily the holy grail – an Australian perspective on what tax reform delivers to corporate taxpayers

May 2026 | SPOTLIGHT | CORPORATE TAX

Financier Worldwide Magazine

May 2026 Issue

Fundamental tax reform, tax simplification and the cutting of red tape associated with tax compliance are often touted by industry representatives, lobby groups and think tanks as virtuous objectives that will enable businesses (and the jurisdictions in which they operate) to thrive.

Significant corporate resources can be devoted to the prospect of potential beneficial reforms in these areas. However, the practical experience (at least in Australia) is that these objectives have been virtually impossible to achieve for large corporate taxpayers. In fact, many of the reforms that have been implemented have served to increase the complexity of tax compliance.

Corporate taxpayers should be alert, not alarmed, when it comes to tax reform. Certainly, they ought to be fully aware of the tax reform occurring in all jurisdictions in which they are, or plan to be, operating. They should be prepared to engage with the process as necessary when any proposed reforms are likely to have a significant impact upon their business.

However, they should also be realistic about what can be achieved from a business perspective through regulatory reform, and shape decisions regarding the internal and external resourcing of tax functions and support environments accordingly.

In Australia, fundamental tax reform has been extremely difficult to achieve. The last major reform was the introduction of a goods and services tax at the turn of the 21st century. Since then, there have been ongoing concerns over the sustainability of Australia’s tax system. Relative to comparable jurisdictions, Australia has a disproportionate reliance on income taxes (rather than consumption taxes) to generate the revenue required to deliver government services and programmes.

In addition, there are taxes imposed at the state level that are generally acknowledged to be inefficient and impediments to desirable policy outcomes beyond raising revenue. For example, state level stamp duties on house sales are a potential contributing factor to the inefficient use of existing housing stock and a lack of affordable housing.

Over the years, there have been many government sponsored independent reviews of the Australian tax system. Most recently, the final report of Australia’s Future Tax System Review, published in 2010, made 138 recommendations for a range of changes to Australia’s tax system. Few of the recommendations were implemented.

The two most significant recommendations implemented (although in a different form to what was recommended) were the Minerals Resource Rent Tax (MRRT) and a carbon tax. These measures materially contributed to the downfall of the government of the day, and both were repealed by the new government.

The current Australian treasurer has recently initiated a new review focused on increasing Australia’s productivity. Red tape reduction and tax are yet again central focus areas. However, the challenge remains that any fundamental change to the Australian tax system would ultimately impact a significant group or groups of voters either by increasing their direct tax burden or reducing their access to government spending.

As such, pursuing a tax reform agenda has been viewed in Australia as political suicide (as evidenced by the experience of the MRRT and the carbon tax). There have been two major exceptions to this general rule: the implementation of reforms mandated by the international community and ‘reforms’ that target large corporates.

Reforms mandated by the international community typically bypass the usual domestic political process. Australia’s contribution to international reforms is usually led by the executive (representatives from the tax regulator). In this context, it may be fair to observe that Australian representatives have played an outsized role in pushing for change relative to Australia’s position as a medium-sized player in the geopolitical sphere.

Although there will usually be a degree of Australian community consultation when Australia is formulating its position, once the final package of reforms is agreed by the international community, it is unusual for there to be any substantial debate in relation to its implementation in Australia.

Parliamentary oversight is provided when laws are required to be passed to implement the reforms, but by this stage parliament’s hands are effectively tied in terms of the principles underpinning the reform package, and it is unlikely to reject the proposed legislation.

In effect, Australia’s politicians are content to ‘ride on the coattails’ of the international community in implementing whatever reform is on that community’s agenda (provided there is no disadvantage to Australian interests).

Reforms that target large corporates paying more tax are generally politically safe. As has often been observed, companies do not vote. Additionally, there is a political benefit to being seen to be doing something that ‘ensures’ that large corporates are ‘paying their fair share’. The main reason that the mining industry was successful in having the MRRT repealed was that it managed to convince voters that the MRRT would impact jobs.

This can be compared to recent significant increases in state royalties imposed on commodities. Voters have benefitted from additional government spending flowing from these royalties and hence the politicians have been content to stand by the increases despite threats from the mining industry to restrict future capital investment in the relevant state.

Often measures targeting large corporates are also mandated by the international community. The perceived political mileage from implementing the recent Organisation for Economic Co-operation and Development reforms targeting base erosion and profit shifting can be seen in the title given to some of the implementing legislation in Australia – for example, Treasury Laws Amendment (Making Multinationals Pay Their Fair Share – Integrity and Transparency) Act 2024.

However, Australia’s measures in relation to large corporates frequently go beyond what is mandated internationally. Each election cycle, it has been the norm to announce one or more new measures aimed at large corporates. These typically involve three possible types of measures, as outlined below.

The first is to increase the disclosures required to be made by large corporates to the tax regulator or the public. This effectively increases the compliance burden for large corporates. Arguably it does little to enlighten the regulator or the public at large. It is highly unusual that these types of disclosures by large taxpayers reveal to the regulator an issue that was not or would not already be disclosed as part of other tax compliance processes.

A cynical perspective may be that, in an environment of shrinking budgets for corporate tax functions, this ensures that the tax function remains focused on low value compliance work and has limited capacity to contribute to the value of the organisation in other more ‘creative’ ways.

The second is to increase penalties associated with taking incorrect tax positions. This has the effect of increasing the jeopardy associated with those positions. In turn, this increases the level of internal documentation and approvals required. However, in the context of reducing budgets and capacity noted above, there can be an increased risk of error.

The third is to ‘tighten’ already tight anti-avoidance legislation, for example making changes to definitions to (in theory at least) expand the scope of the provisions. The expansion may be theoretical because Australia’s anti-avoidance rules already have very broad potential application. Because of the already broad drafting, any changes increase the difficulty in interpreting the legislation and the level of uncertainty.

At the least, this reinforces the jeopardy associated with a company’s tax positions as there are generally increased penalties where anti-avoidance provisions apply. Additionally, the reputational implications of a public tax dispute in relation to the application of an ‘anti-avoidance’ provision may be more acute than if the dispute relates to the application of an obscure technical provision.

It seems to us that with politicians continuing to focus on how to generate more revenue rather than on their own accountability for how the revenue collected is spent, these trends are unlikely to change dramatically in the near future. In this context, companies should carefully consider the level of energy and focus they devote to lobbying for tax reform. Of course, if tax reform is proposed, then it is important to remain part of the conversation and monitor developments. However, the objectives of that involvement should be realistic or pragmatic (for example, containment or avoiding worst-case outcomes rather than positive change may be a suitable corporate objective).

It is also important to recognise that tax will remain a complex and highly scrutinised area in which mistakes can be costly. A company’s in-house tax function is its most valuable asset in this regard, and it is important to ensure that it has capacity to support the business rather than being caught in the compliance trap.

Outsourcing ‘strategic thinking’ to external service providers can be problematic. There can be a disconnect between the strategies of the external service provider and the practical operations of the company. If the strategy is not implemented appropriately in the context of the business, it can be valueless (that is, it does not actually deliver the value that was expected) or be perceived as aggressive tax avoidance.

Developments in artificial intelligence (AI) are likely to provide some opportunity for efficiency. However, caution is warranted.

By way of example, the production of documentation supporting and defending a company’s ongoing tax positions may be a time-consuming task performed by the company’s tax function. This might comprise a large volume of material that needs to be refreshed annually. One potential approach to freeing up the time of the tax function is to rely on AI to generate this documentation.

However, this may risk the regulator taking the view that there is insufficient governance over the company’s tax positions. A more sustainable approach would be to critically assess the documentation and streamline the elements that are valuable to reduce the volume of effort required (with AI only being used to perform discrete tasks in the process).

Stewart Grieve is a partner and Don Spirason is a special counsel at Johnson Winter Slattery. Mr Grieve can be contacted on +61 (3) 8611 1353 or by email: stewart.grieve@jws.com.au. Mr Spirason can be contacted on +61 (3) 8611 1379 or by email: don.spirason@jws.com.au.

Stewart Grieve is a partner and Don Spirason

Johnson Winter Slattery