Australia’s corporate tax ranking ‘the warning light’

Australia’s corporate tax system ranking has remained stagnant this year compared with 2025, at 29th place in the Tax Foundation’s 2026 international tax competitiveness index out of the Organisation for Economic Co-operation and Development (OECD) 38 member countries.

RSM partner, international tax and transfer pricing leader Liam Delahunty said the ranking for corporate tax, which stands at 30 per cent compared to the 24.2 per cent OECD average, is “a warning light”, and flagged that the nation’s standing could deteriorate if the government’s proposed discretionary trust tax reforms are legislated.

“This survey was conducted without regard to those possible changes,” Delahunty told Accounting Times.

“It’s only going to make matters worse. The trust reforms are not primarily a foreign investment measure, but they matter to competitiveness because they affect how Australian businesses accumulate and reinvest capital.”

Delahunty said Australia has one of the most complicated tax systems in the world (alongside the US), and underscored the challenges of coping with the wave of legislative changes.

He said a tax system should not only assess competitiveness from the perspective of inbound multinationals, but it should also question whether Australian-owned businesses can grow, reinvest, and “internationalise” from an Australian base.

“The risk is that while other countries are improving investment allowances and reducing structural friction, Australia is adding another layer of tax and restructuring complexity,” he said.

Delahunty urged the government to “seriously reconsider” the breadth of the proposed changes, particularly in relation to the double taxation of corporate beneficiaries, as this could negatively impact Australia’s competitiveness.

“For multinationals, Australia's excellent participation exemption is offset by a limited treaty network, withholding taxes and relatively burdensome anti-avoidance architecture. What the survey overlooks is the fact that Australia's imputation system does not allow any credit for foreign taxes, thereby imposing double taxation on Australian shareholders whose business expands offshore,” he said.

“In my career, I have never had as many Australian resident business owner clients asking me about potentially leaving Australia as I have seen in the last six to 12 months as a result of the proposed trust tax reforms.”

Delahunty also attributed the influx of inquiries to the overall high compliance burden of the reforms, and lack of competitiveness of the regime.

Australia ranked eighth overall in the competitiveness index, which used several key metrics to measure rankings, including property taxes, wealth taxes, estate, inheritance, and gift taxes, property transfer taxes, capital duties, corporate tax, as well as cross-border tax, among others.

While acknowledging Australia’s overall strong standing in the world, Delahunty said this ranking hides the country’s ranking for corporate and cross-border tax, which are in the bottom quartile.

“The 30 per cent corporate tax rate was relatively conventional. It is now an outlier among comparable economies,” he said.

“A high statutory rate does not automatically stop investment, but it raises the hurdle rate. Australian projects must generate a stronger pre-tax return to deliver the same results to investors. Australia has spent a decade defending the integrity of the corporate tax base without materially addressing whether the rate and capital allowances remain internationally competitive.”

Instead of relying heavily on corporate tax, Delahunty said, the Australian government should pivot more towards indirect taxes as they are typically more efficient and have a “less burdensome impact on competitiveness”, as well as target the shadow economy.

“The black economy is actually a huge part of the untaxed segment of the Australian economy. Going after that would be a far better, more productive and helpful means of ensuring that Australia is not having to rely on other forms of taxation,” he said.

“There's a significant focus on overwhelmingly compliant businesses in Australia while the shadow economy allows tax evasion to continue unchecked.”