Grattan Institute Proposes GST Increase to Boost Pensions

The think tank argues a higher tax rate could fund significant cost-of-living relief and address rising national debt.

Updated on Oct. 25, 2026 in Financial Planning

Isometric editorial illustration showing a stylized brass weight resting on a simple stone plinth, representing Australian fiscal policy. — The Grattan Institute has proposed raising Australia’s Goods and Services Tax to 15 percent, projecting $78 billion in annual revenue to fund pension increases. AI Illustration. Upload story photo >

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Should Australia increase the GST to fund higher age pension payments?

The Grattan Institute has released a report proposing an increase to the Goods and Services Tax to 15 per cent to generate $78 billion in annual revenue. This plan aims to fund pension increases and provide cost-of-living relief amidst rising national debt.

Why it matters

The proposal addresses long-term fiscal sustainability concerns, as the government faces mounting debt from an ageing population and high borrowing costs. By reallocating revenue, the plan seeks to support vulnerable households while streamlining federal budget commitments.

The report suggests raising the GST to 15 per cent, which would generate $78 billion annually to fund $58 billion in cost-of-living relief. It also proposes increasing fortnightly single age pension payments from $1135 to $1225.

The players

Grattan Institute

This independent Australian public policy think tank provides analysis and research on economic and social issues facing the nation.

The details

The report, titled Budget Reboot: How to Fund Australia's Future, suggests eliminating the current GST revenue sharing agreement with Western Australia, which currently costs the federal budget $6 billion per year. The proposed budget redistribution includes $33 billion for low-income tax cuts and $18 billion for state and territory budgets.

August 2026: Australian government gross debt reached $1 trillion.
2030: Federal government debt is forecast to reach $1.2 trillion.

Market Dynamics

The proposal to scrap the federal GST revenue sharing deal with Western Australia marks a direct challenge to existing intergovernmental fiscal arrangements. This shift suggests a broader move toward centralising tax revenue to combat long-term debt trajectories.

Eligible pensioners could see an annual full age pension income boost of $2300 under this proposal. However, the plan necessitates a significant increase in the consumption tax rate, which would alter the cost of goods for all Australian households.

The takeaway

The Grattan Institute report highlights the difficult trade-offs required to manage a rising national debt that is projected to hit $1.2 trillion by 2030. Readers should monitor these debates as they directly influence future tax obligations and the adequacy of government welfare payments.