Australians living longer and in better health, but it comes at a cost
The Federal Government’s Intergenerational Report flags changes to employment and taxation as the number of older Australians is set to double
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Australians are set to live longer and be in better health into their later years, but that means future generations will need to shoulder a bigger tax burden to pay for it.
Those are some of the major findings of the government’s much-anticipated Intergenerational Report, to be released on Thursday by Treasurer Jim Chalmers.
The report, the fifth of its kind produced over the past 20 years, makes key social and economic forecasts about the next four decades – and what needs to be done to sustain those changes.
It will show life expectancy is set to rise to 87 years for men and 89.5 years for women by 2062-63.
The proportion of the population aged over 65 is forecast to double, while the number of people over 85 is set to triple, which the report concedes is “an ongoing economic and fiscal challenge”.
The economic consequences of those changes will be significant, with health spending expected to increase sharply, Dr Chalmers said.
Four other main expenditure areas of the Commonwealth budget, being aged care, the National Disability Insurance Scheme, interest on debt, and defence – will leap from one-third of total government spend to one half.
In particular, the so-called ‘care economy’ will almost double from eight per cent of GDP to about 15 per cent in 2062-63.
“Whether it’s health care, aged care, disabilities or early childhood education – we’ll need more well-trained workers to meet the growing demand for quality care over the next 40 years,” Dr Chalmers said.
“The care sector is where the lion’s share of opportunities in our economy will be created.”
Productivity, which has slumped for several tears now, is expected to remain flat and the report has revised down growth “from its 30-year average of around 1.5% to the recent 20-year average of around 1.2%”.
“Placing more weight on recent history better reflects headwinds to productivity growth, such as continued structural change towards service industries, the costs of climate change, and diminishing returns from past reforms,” it reads.
“This downgrade is consistent with forecasts in other advanced economies.”
Australia’s population in 40 years’ time is projected to hit 40 million, although the rate of growth will slow. The economy will rely more greatly on migration to meet skills shortages.
Dr Chalmers said the Intergenerational Report is a warning of the need to ensure the coming changes “work for us and not against us”.
“We’ve shown and demonstrated a willingness and an ability to make difficult decisions to put the budget on a more sustainable footing,” he said.
The report’s findings will spark renewed debate about the need for broad-based tax reform, forecasting a growing reliance on income tax as other revenue – like company tax and the GST – plateaus in the next decade.
One section of the report reads: “Structural changes to the economy are projected to put pressure on the revenue base over the coming decades.”
But rather than raising the GST, Dr Chalmers has flagged tax reform targeting multinationals, the petroleum resource rent tax, high-balance superannuation and cigarettes as possible areas of focus.
Ahead of the report’s release, the Business Council of Australia this week unveiled its national plan to grow productivity and increase competitiveness via a package of reforms.
“If we want sustained wages growth and to maintain full employment, the nation needs a reinvigorated economic growth agenda driven by large-scale investment, higher productivity and greater innovation,’’ the group’s president Tim Reed said.
“Our [plan] outlines how to deliver that agenda – putting forward the big ideas to dramatically alter Australia’s economic trajectory to deliver higher living standards.’’
Among its proposed policies are calls for microeconomic reform, a 10-year net zero roadmap and an overhaul of taxation.
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The Federal Budget may have softened some of its proposed tax reforms, but it has exposed a bigger issue: too many families are relying on wealth structures that no longer reflect the realities of modern life.
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For many Australians, the 2026 Federal Budget initially felt like a direct challenge to the way wealth is created, held and transferred between generations.
The headlines were immediate: changes to capital gains tax, reforms to discretionary trusts, restrictions on negative gearing and increased scrutiny of investment structures. Unsurprisingly, affluent families, business owners and investors began asking the same question:
Is the way we hold our wealth still fit for purpose?
In recent days, the government has announced several significant amendments following industry consultation and public feedback, including exempting testamentary trusts from the proposed 30 per cent minimum tax and expanding capital gains tax concessions for small businesses.
The backdown is welcome. But it also highlights something much bigger.
This Budget has accelerated a conversation that many Australian families have been postponing for years.
The conversation is not really about tax. It is about wealth stewardship.
For decades, Australians have built wealth through businesses, property, investments and careful long-term planning. Yet many families have not revisited the legal structures surrounding those assets in years, sometimes decades.
We often see clients who have spent years building significant wealth, only to discover their legal arrangements no longer reflect their current circumstances.
Their children are now adults. They may own multiple properties.
They may have sold a business, entered a second marriage, become grandparents or accumulated digital assets that did not exist when their original estate plans were prepared.
The trust that distributes income may need to be reconsidered. The bucket company may no longer be so attractive.
The Budget has simply exposed a reality that already existed: wealth structures cannot remain static while life continues to evolve.
Importantly, trusts themselves are not the issue.
Trusts are legitimate planning tools that provide flexibility, protection and continuity. When used appropriately, they allow families to adapt to changing circumstances over time.
And neither is tax the issue, really. Getting the fundamentals right is more important for long-term, sustainable wealth than a few favourable tax treatments around the edges.
The real issue is complacency.
Too often, families create structures and assume the job is done. It isn’t.
Estate planning is no longer a document you sign once and file away in a drawer. It is an ongoing process that should evolve alongside your life.
We are also seeing a broader shift in how Australians define wealth itself. It is no longer just the family home and an investment portfolio.
Modern wealth includes businesses, digital assets, cryptocurrency, intellectual property, frequent flyer points and increasingly complex family arrangements.
At the same time, Australians are living longer than ever before, meaning wealth may need to support multiple generations simultaneously. This creates new responsibilities and new risks.
How do you help your children enter the property market without exposing family wealth to relationship breakdowns?
How do you structure wealth so that it remains a source of opportunity rather than future conflict?
These are the questions families should be asking now.
The recent debate surrounding testamentary trusts also serves as an important reminder that policy decisions can have unintended consequences for vulnerable Australians. It is encouraging that the government has listened to feedback and clarified its position.
But the lesson remains: the wealth landscape is changing.
Increasingly, governments, regulators and tax authorities are paying closer attention to how wealth is held and transferred. That means families cannot afford to adopt a “set-and-forget” approach to their structures.
The families who will be best placed for the future are not necessarily those with the greatest wealth.
They are the families with the greatest clarity. Clarity around ownership, succession and governance. And clarity around how wealth will transition from one generation to the next.
Ultimately, preserving wealth is not about avoiding change.
It is about preparing for it.
Because the greatest risk is not change itself.
It is losing the ability to respond to it.
Anthony Hunt is Co-Founder of Wealth Lawyers and former COO of Westpac Private Bank. He advises business owners, investors and affluent Australian families on wealth protection, succession planning and intergenerational wealth transfer
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