A new report from the Actuaries Institute has highlighted significant disparities in how Australia's tax and transfer system treats individuals based on age, even when their gross incomes are identical. The findings point to a system that delivers substantially higher net outcomes for older Australians compared to their younger counterparts.

Core Findings from the Actuaries Institute Analysis

The report, part of the broader Australian Actuaries Intergenerational Equity Index work, examines 25 years of data on income, taxes, and government spending across age groups. It reveals that policy settings have created outcomes where age, rather than need or means alone, drives large differences in final financial positions.

One striking illustration involves two Australians earning the same gross income of $100,000. A 30-year-old ends up with a net position of approximately $85,700 after taxes and transfers. In contrast, a 71-year-old in the same situation reaches $128,100. This $42,400 gap arises from a combination of tax treatments, eligibility for benefits, and spending patterns that vary by life stage.

Over the past two decades, older Australians have experienced stronger average income growth than younger groups. People aged 20 to 30 stand out as the only cohort that has not seen gains in net income during this period. Government spending has increased faster than tax collections overall, but the distribution has favoured spending on children and those aged 80 and over, while working-age adults have shouldered much of the additional tax load.

Why Age Creates Such Different Tax Outcomes

Australia's progressive income tax system interacts with age-specific rules in ways that amplify differences. Superannuation earnings and withdrawals are generally tax-free for those over 60, allowing retirees to retain more of their income compared to wage earners paying full marginal rates. The age pension features more generous means testing than payments available to working-age people, such as JobSeeker.

Housing-related taxes also play a role. Stamp duties hit more frequently during working years when families form or relocate, while capital gains on primary residences receive favourable treatment that benefits long-term owners, many of whom are older. Investment income from assets like shares and property often faces lighter effective taxation than labour income, and older Australians hold a disproportionate share of such wealth following decades of house price growth.

These elements mean that two households with identical gross incomes can face vastly different tax bills and receive different levels of government support purely because of the ages of their members.

Impacts on Wealth Building and Housing Access

The divergence has consequences for younger Australians seeking to accumulate assets. Strong house price growth over 20 years has boosted wealth for existing owners, predominantly older cohorts, but has made entry into home ownership more difficult for those starting out. Younger workers often face higher effective tax rates on wages while saving for deposits, even as asset-based income enjoys concessions.

This dynamic contributes to a sense that the system rewards those who already hold property and investments more than those building careers and families. Working-age adults contribute significantly through income and payroll taxes, yet see fewer direct offsets in the form of benefits or concessions compared to retirees.

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Historical Shifts and the Changing Age Profile of Income

Twenty years ago, the distribution of income and wealth across ages looked different. Government policies on superannuation, pensions, and asset taxation have evolved, but have not fully adjusted to the reality that older Australians now hold a larger share of total wealth on average. Related analysis from the Tax and Transfer Policy Institute at the Australian National University has reached similar conclusions, noting that current settings increasingly direct resources toward older groups at the expense of younger ones.

The report emphasises that variation within generations remains large—many older Australians face poverty or health challenges—yet the average picture shows a tilt in outcomes that raises questions about long-term sustainability as the population ages.

Perspectives from Economists and Policy Experts

Actuaries involved in the research stress that some differences reflect genuine needs, such as higher healthcare costs later in life. However, they argue that eligibility rules and tax design contribute substantially to the gap. Economists have long pointed to the inconsistent taxation of different income types—wages versus investment returns—as a source of inequity that favours those with accumulated assets.

Government discussions, including at the Economic Reform Roundtable, have acknowledged the need for greater fairness for workers and future generations. Recent budget measures have begun to address elements like capital gains tax treatment, negative gearing limits, and minimum tax rates on discretionary trusts, though these changes remain subject to final design and passage.

Potential Reforms Under Consideration

The Actuaries Institute suggests several avenues for rebalancing. These include reviewing age-based tax offsets and income support rules, tightening the assets test for the age pension, and exploring a broader goods and services tax base. A broad-based land tax is also discussed as a way to shift some burden toward those who have benefited most from property value increases.

Further ideas involve more consistent taxation of investment income across different asset classes, potentially through dual-income tax approaches that separate labour and capital returns. Such changes would aim to maintain incentives for work and saving while reducing age-driven disparities.

Broader Economic and Social Implications

If left unaddressed, the current settings could place increasing pressure on the tax base as the proportion of the population over 65 grows. Working-age Australians already bear much of the income tax load; further shifts could affect productivity, workforce participation, and overall economic dynamism.

At the same time, any reforms must balance support for those in retirement with the need to ensure younger generations can build secure financial futures. The upcoming federal Intergenerational Report is expected to provide additional context on long-term budget sustainability.

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Looking Ahead: Balancing Fairness Across Generations

The report contributes to an ongoing national conversation about how tax and spending policies interact with demographic change. While wealth accumulation naturally increases with age for many, rapid asset price growth combined with specific tax concessions has accelerated the divergence.

Policymakers face the challenge of preserving the strengths of the current system—such as incentives for retirement saving—while addressing features that produce markedly different outcomes for people in similar financial circumstances but at different life stages. Public debate on these issues is likely to intensify ahead of future budgets and the next Intergenerational Report.