Family Matters

Any tax reform should have a moral purpose and, here in Australia, be aimed squarely at supporting families, writes Federal MP for Groom, Garth Hamilton.

Tax policy has the ability to shape the nation. The behaviours it rewards become our way of life, our various pursuits of happiness follow pathways it maps out, and the Australian dream adheres rigidly to its rules. We often talk of tax reform as if it can only allow what is rational and can be calculated, but the truth is it’s a moral issue and one of great emotional complexity. It’s true that the power to tax is the power to destroy but it is also true that our tax policy creates us.

We are what we tax. Our national identity is inseparable from our approach to taxation. Get the settings right and we can foster aspiration, enable social mobility, reward generosity. Get the settings wrong and we foster dependence, enable inequality and reward selfishness.

Pre-civil rights era America provides us with ample examples of the latter; poll taxes created a barrier to political participation for black Americans. In the South, tax receipts were divided by race and segregated schools were funded accordingly, with the result being black schools got less funding because black workers earned less and paid less tax. Recently, in 1978, Proposition 13 capped property tax rates in California for existing (largely white) landowners while shifting a higher tax burden, and creating a barrier to entry, to new (black or hispanic) buyers.

These taxes were repugnant in design, but my point is that by virtue of that design they helped shape the America of its time. Today we can take these lessons and see that as much as it has the power to destroy, taxation policy can appeal to our better angels too. Knowing this, we can no longer allow our legislators to deliver taxation without a moral purpose, and we cannot accept the mere generation of government revenue as sufficient cause for new taxes.

The tax reform to which the nation demands we attend must begin by answering the age-old questions, ‘who are we?’ and ‘where are we going?’ As a member of the Liberal Party, I have some certainty as to my answers to these questions.

If you’re looking after each other, Australia should be looking after you. If you invest your time, money, energies, or maybe even, if you’re lucky, your love in another person, Australia should be building its future around you. Family is a powerful word. Maybe its meaning has changed a little over time, but what has not changed is the way that being in a family makes something more out of the individual.

There is a man called George in my electorate who cares for his mother. Both have serious disabilities, and at some point, their roles swapped as George’s mother’s needs outgrew his own. They are as much a family as the traditional mum, dad and 2.4 kids, and their entire life story is about looking after each other.

My neighbours in Newtown are that more traditional family: dad’s an electrician, mum’s a teacher, the first kid leaves school next year, and the youngest is not far behind. They are worn out, having seen nearly every cent earned go to keeping their heads above water—mortgage paid, electricity kept on, school fees sorted, registrations on two cars, insurance, food, fuel, you get it. They have been working hard to keep things afloat with the aspiration of a better future for their kids, but only now are they realising their kids will still need financial support for years to come. They are finding out just how hard it can be for a family to look after each other, even in an emptying nest.

In the small country town of Oakey, I met a father who recently split with his partner. Though amicable, the costs of keeping two separate households are crushing him. He does shift work, complicating custody, but moves heaven and earth for his kids. They are a family trying not to fall apart.

In East Toowoomba, Kat and Dan, both from previous relationships, have almost paid off their mortgage and now they’re working out how to help their grown-up kids buy their own homes. Despite good careers and incomes, the next generation is leaning heavily on the “Bank of Mum and Dad” to get their own little piece of the Australian dream.

Throughout my electorate there are couples without kids needing dual incomes just to afford a home, and Yazidi refugees who, from necessity, became a family by caring for each other whilst in temporary accommodation. There are mums living in granny flats in their kids’ houses, and grandparents who’ve had to make room for a grandchild to stay for a couple of years until they get themselves on their own feet.

Our tax system must prioritise families.

These stories, woven together, constitute Australia’s national narrative, one driven by the human desire to give, share and care. Regardless of what ‘the family’ looks like, it is the care that determines family, not the makeup. Accordingly, families come in all shapes and sizes, and they are our society’s building block. But now, more than ever, Australian families are struggling. The fall in living standards isn’t just a statistic—it’s the dirt under working Australia’s fingernails, the callous beneath the knuckle, the creeping ache down a worn out back. People don’t want another white paper on tax reform. They feel the brokenness of the system and they want change. As Liberals, we are duty bound to deliver it.

Taxation without a clear purpose is little more than bureaucratic overreach. As Ronald Reagan famously quipped, “Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” Well, in Australia we have certainly embraced this approach, and the average Australian is paying the price.

Australia’s personal income tax structure, with its 32.5 per cent rate kicking in at AUD 45,001, and 45 per cent for incomes above AUD 190,000, often feels like punishment for aspiration. Income-tested benefits like the Family Tax Benefit (FTB) and the Child Care Subsidy (CCS) exclude middle-income families, creating disincentives for work and family growth. Childcare costs, averaging AUD 120 per day before subsidies, and a median maternal age of 31.9, are evidence of financial pressures delaying family planning.

Over the nearly five years since I entered public office, I have had the (dis)pleasure of observing a vast array of government ineptitudes, almost always excused as consequences of the unforeseen type. However, the worst example of lived experience falling well beneath design intent is how tough it is to raise a family in modern Australia. Financial constraints have always caused younger Australians to hold off starting families of their own and limit the number of children they have. What has changed is that the dominant constraints, house prices, real wages and cost of living are now deeply ingrained, long-term problems. These issues are exacerbated by the broad range of direct and indirect tax pressures Australians confront at various stages of their lives: income tax, tax on interest earned, GST, vehicle registration, alcohol tax, tobacco tax, the Medicare levy, the NDIS levy, stamp duties, fuel excise, land tax, capital gains tax and so on.

From an economic perspective, there is simply no incentive to start a family. Despite this being a critical function of our nation’s growth and even survival, it is a step that places a huge burden on those who undertake it. For clarity I am deliberately using the broadest and most contemporary use of the word because the evidence is clear that no matter what the makeup or structure of a family, when people come together, they can create something greater than themselves.

Our tax system must prioritise families as the building blocks of society, making it easier to look after each other. We must reduce the current tax burden that is placed on families and, in so doing, empower family choices, whether they be for career, caregiving or growth. This is the starting point for shaping a tax policy that seeks to address two of Australia’s biggest problems: first the continued fall in our fertility rate and second, the unravelling of our social cohesion.

Australia is not unique in experiencing a fall in its fertility rate, in fact almost every Western nation is undergoing similar declines. There are clearly broad cultural and societal causes for this decline; however, what is clearly within Australia’s gift is the ability to respond to this challenge with incentivisation.

The loss of social cohesion also speaks to broader Western experiences, and it has given rise to the populism witnessed across many similar democracies. While this is a movement which is almost always wrong-headed in its demands and outcomes, its origins and driving force are easily identifiable—the system is not working. We must accept this, and respond. Inequality, alienation, and a deep distrust of the institutions that were created to protect us, are widespread feelings that must be addressed earnestly. Australians are expressing this frustration at the ballot box but, more concerningly, they are increasingly expressing it through the repression of those with a different viewpoint, and rhetoric which is at times highly inflammatory and divisive.

Taxation, when properly purposeful, can reshape not just a nation’s economic fortunes, but its social fabric. John Howard’s introduction of the Goods and Services Tax (GST) in 2000 exemplifies this. Facing a patchwork of inefficient state taxes and an overdependence on income tax, Howard argued that a 10 per cent consumption-based GST would simplify revenue and fund income tax cuts. Despite his 1996 “never ever” pledge, he embraced the GST to shift the tax burden from income to consumption, encouraging savings and investment. By 2023, the GST generated AUD 70 billion annually, proving its fiscal impact. Sadly, we’ve seen the reintroduction of many inefficient, unproductive and harmful taxes that the GST sought to abolish, adding to the tax burden on income earners, families, businesses and investors.

Change will require both courage and common sense.

Internationally, France’s family quotient system demonstrates how taxation can support families. By dividing taxable income by “shares” (1 per adult, 0.5 per child for the first two, 1 thereafter), it reduces the tax liability for larger families, saving €2,056 for one child and €562 more for a second on a €60,000 income. This contributes to France’s stable total fertility rate (TFR) of 1.8, compared to Australia’s 1.6. Hungary’s Family Tax Benefit, reducing the tax base by HUF66,670 (~AUD 255) for one child and up to HUF220,000 (~AUD 840) per child for three, saves families up to AUD 3,024 annually. These are models of taxation being used as a tool to incentivise family growth and economic stability, and should serve as a lesson for Australia. By enabling families to care for themselves and plan for their future, these systems are good for the family unit and for the nation they constitute.

Taxation as a means of incentivising behaviour and shaping the nation does work but, to achieve it here at home, Australia needs to change the way we debate tax reform. Both Labor and the Coalition have been guilty in recent times of avoiding structural change to our tax system, preferring instead to offer short term relief and, dare I say it, a populist approach that eschews rational consideration of the issue and informed debate. The cost of this inaction has been to let the gap between the ‘haves’ and the ‘have nots’ widen.

I am firmly of the view that Australians are not only open to a debate on tax reform but would support a party willing to show them how they can change things for the better. JWS Research found that after the election, eight in ten voters wanted to see the government undertake the “more difficult and complex reforms needed to grow the economy and balance the budget”. The door is open for tax reform, but change will require both courage and common sense.

What I am suggesting below is not a cast-iron embodiment of what I see as the only way ahead, but rather a series of overtures that offer a compassionate, family-centred approach to tax reform that draws on international best practice. Whilst it does not yet address the issue of costs, I believe tax reform must start with ‘what is our intent’ rather than ‘what is our budget’. It proposes two pillars: reducing personal tax burdens and supporting family choices.

Personal tax burdens could be relieved by means of the following.

Family Tax Offset: A universal AUD 2,000 per child offset (up to three children) replaces the income-tested FTB-A supplement (AUD 896.30/child). Inspired by France’s family quotient, this would save a family with two children AUD 4,000 annually, regardless of income, benefiting Australia’s 1.5 million FTB-A recipients.

Child-Related Tax Deduction: Modelled on Hungary’s Family Tax Benefit, a AUD 1,000 per child deduction (capped at three) would save a family in the 30 per cent bracket AUD 900 annually, supporting larger families without income tests.

Lower Middle-Income Tax Rates: Reducing the 32.5 per cent rate (AUD 45,001–120,000) to 30 per cent and raising the tax-free threshold from AUD 18,200 to AUD 20,000 would save a single parent earning AUD 80,000 approximately AUD 2,250 yearly, easing cost-of-living pressures.

Income Splitting: Inspired by France, allowing married couples to split income for taxation purposes would reduce tax liability for dual-income families, encouraging workforce participation.

Supporting family choices could be achieved by the following.

Flexible Childcare Tax Credit: Replacing the Child Care Subsidy (CCS) which pays a percentage of fees directly to approved providers, based on family income, activity levels, and the number of children in care with a 50 per cent tax credit on childcare costs (up to AUD 5,000/child) would save a family spending AUD 8,000 annually AUD 4,000. Integrating the CCS 3 Day Guarantee (36 hours/week) from 2026 would ensure universal access, boosting maternal employment as seen in France (80 per cent participation).

Caregiver Tax Deduction: A AUD 3,000 deduction for primary caregivers, including stay-at-home parents or those supporting elderly relatives, would save AUD 900 (30 per cent bracket) annually. Inspired by Hungary’s lifetime tax exemption for mothers with four children, this values unpaid care across diverse households.

Family Support Deduction: A AUD 4,000 deduction per dependant incentivising intergenerational care, akin to France’s pension alimentaire. This would extend to cover adult children in tertiary education, acknowledging that increased costs of housing during tertiary study keep children in the family home for longer. Where regionality requires the adult child to leave the family home for study purposes, a dispensation would be applied.

Of course, I am not suggesting a ‘copy paste’ approach to reform but rather that we take a uniquely Australian approach to what is a universal problem. Family tax policy is often highly politicised and those who promote it on the right are almost always condemned for seeking to return Australia to the 1950s. However, by taking policies from centre-right governments, like Hungary, and from centre-left governments, like France, we are able to frame the conversation as not being between left and right but rather between family and the state. An interesting outcome of (centre-right) Hungary’s lifetime tax emption for mothers is that it addresses an issue often championed by the left, that of unequal outcomes for women who leave the workforce to have and raise their children.

Taxation must have a purpose beyond feeding government inefficiency.

Populist movements like the Teals, or the Democrats before them, often frame ‘tax reform’ as a solution to inequality but only propose measures that burden families further. Their calls to broaden the GST or reduce negative gearing tax benefits (which literally subsidise housing investment thus driving up supply at a time of critical shortages) risk increasing costs for middle-income households already stretched by housing and childcare expenses. Unlike the framework I propose here, which prioritises tax relief and choice, these populist policies focus on revenue generation, echoing Reagan’s critique of government as a machine that taxes without purpose. True reform must start in the home, addressing families’ lived experiences—mortgages, childcare, caregiving—not abstract fiscal goals.

Implementing this framework requires simplicity and inclusivity, delivering offsets and deductions via annual tax returns on myGov, removing FTB income tests and streamlining CCS to reduce administrative costs. France’s automated quotient system offers a model for minimising errors. Monitoring via the Australian Bureau of Statistics will track disposable income, TFR, and workforce participation, which allows constant and up to date evaluations and adjustment of these policies.

The political messaging is clear: “If you are investing time, money, love, or energy in another person, these policies support you.” This shifts taxation from serving government to supporting families and fostering a connected future built on shared values. Taxation must have a purpose beyond feeding government inefficiency. A system that taxes without purpose ultimately stifles aspiration.

The framework I am proposing reimagines taxation to empower families—single parents like the father in Oakey, caregivers like George, or couples like Kat and Dan. By reducing tax burdens and supporting choices through offsets, deductions, and credits, it addresses the lived struggles of Australians.

The Liberal Party was first formed as a collective of people who opposed Labor’s socialist vision for Australia’s future. We believed, as many of us still believe, that the best decisions are not made by the selected few of government but rather by the many. The nation we build is thus made better when it is guided by the decisions taking place a million times over at kitchen tables around Australia. When we empower families to uphold our values and pursue progress, we build a fairer, more compassionate, and more prosperous nation.

For 65 of the last 100 years Australia has turned to a centre-right coalition to lead it because, essentially, we have trusted mainstream Australians to shape their own future. When the Liberal Party has succeeded, it’s because we placed the nation’s destiny in their hands. It’s time to do so again—and changing our tax system is a great place to start.

Garth Hamilton, Federal MP for Groom, holds an engineering degree from the University of Queensland and has worked in mining and major infrastructure. He and his wife Louise have three children.

This article from the Winter 2025 edition of the IPA Review is written by Federal MP for Groom, Garth Hamilton.