Taxpayers are contributing more than ever, with the average tax take per Australian hitting $30,633 in 2024-25, even as public debt keeps rising.
New Australian Bureau of Statistics figures show combined federal and state expenses jumped 7.4% last financial year, well above the 4.5% rise in revenue.
Governments collected a record $839 billion in tax, driven mainly by higher personal income tax and GST receipts.
Disability-related benefits, including the National Disability Insurance Scheme and other support payments, climbed another 9.4% to $87.3 billion, setting a new peak despite slower growth than the previous year.
Behind the headline numbers sits a rapidly expanding public sector balance sheet, with total government debt increasing by $112.2 billion in the latest year, compared with $86.7 billion a year earlier and $53.9 billion in 2022-23.
Federal spending now equals around 28% of GDP, near a four-decade high once pandemic effects are excluded, prompting calls from major investment houses to push it back closer to 25%.
Achieving that level would require cutting about $102 billion from federal outlays over the four years to 2029-30 and holding annual spending growth to roughly 3%.
Budget planners say the May 12 budget will respond to tighter global conditions while centring on resilience, savings and tax system changes.
The biggest annual jumps in 2024-25 expenses were employee costs, up $22.1 billion, and social benefits to households, up $20.6 billion, largely reflecting higher disability support.
Research from think tank e61 finds that almost the entire rise in combined federal and state spending stems from in-kind social services such as the NDIS rather than direct cash transfers like pensions.
Those services are typically more universal and less tightly targeted, which analysts warn drives higher costs and weakens the redistributive power of the welfare system.
The Albanese government is now trying to cap annual NDIS cost growth at 5% or less, with the scheme expected to cost $52 billion this year and a projected $62 billion by 2028-29.
The ABS notes that the recent slowdown in disability spending growth aligns with reforms announced in the 2024-25 budget to bolster the scheme’s financial sustainability.
Tax policy is emerging as the other fault line in the fiscal debate as personal income tax revenue continues to rise despite headline rate cuts.
ABS data shows personal income tax collections grew 1.5% in 2024-25 even after the stage 3 tax cuts took effect on July 1 2024, lifting personal income tax to 11.1% of GDP.
The Parliamentary Budget Office projects that bracket creep alone could push this to 14.5% by 2036, a trend critics argue is an opaque and unfair way to raise revenue.
Australia already leans heavily on income tax, which accounts for 62% of total tax revenue, far above the OECD average of 35% and second only to Denmark in tax from work as a share of GDP.
Policy experts are instead pushing for a broader package that could include indexing income tax thresholds at around 2.5%, shifting more revenue to a higher and wider GST base, reducing reliance on stamp duty in favour of land tax and cutting personal and corporate tax rates while lifting thresholds.
