Distributional impacts of Australia's tax and transfer system over the lifetime

The Australian tax and transfer system redistributes both across individuals and across lifetimes, with the same annual policy settings potentially having different lifetime distributional consequences depending on when people experience them. In this final presentation for my Crawford School PhD I provide an overview of my research, with new comparative analysis of the lifecourse effects of hypothetical changes to annual policy settings. First, I present updated and extended measures of the net incidence of taxes and transfers across the lifetime, examining the relationship between incidence and lifetime income across birth cohorts using a synthetic, person-level panel generated through dynamic microsimulation spanning 1970 to 2070. I then compare baseline outcomes to three budget-neutral simulations that change the balance of annual tax and transfer incidence. Taken together, these simulations highlight that changes to annual settings change not merely when in a person’s life tax is paid and income support received, but also the distributional consequences of policy across generations at different levels of lifetime income. Finally, I link these outcomes with existing cohort-level work with Peter Varela and Robert Breunig which takes a more comprehensive picture of income, taxes and transfers, highlighting further questions of intergenerational equity. Matt Smith is a Director at the Treasury and has been a member of the public service since 2009. His work has primarily focused on policy analysis on Australia’s tax and transfer system including revenue forecasting and costing and distributional analysis of tax and transfer policies using microsimulation modelling.