Once a Universal Basic Income is clearly defined, the next question follows quickly. Could Australia actually afford it.

This question is often framed as a simple yes or no. In reality, affordability depends on scale, sequencing, and design. A full Universal Basic Income that replaces a living wage would require deep restructuring of the tax system. A partial Universal Basic Income tells a different story. Australia already manages large income transfers, operates a complex welfare system, and raises substantial revenue through multiple channels.

The real question is not whether money exists. It is how income security is structured, what is prioritised, and how costs and benefits are shared.

This article looks at Australia’s current baseline, then compares two funding pathways. One is mathematically possible but politically fragile. The other is more complex, but far more realistic.

Australia at a glance

Before examining models, it helps to anchor the debate in current reality.

• Commonwealth spending on social security and welfare: ~$253 billion per year
• Personal income tax collected: ~$331 billion per year
• Company tax collected: ~$141 billion per year
• Indicative cost of a partial Universal Basic Income: ~$65–180 billion per year, depending on size and design

These figures show the scale of what already exists. Any Universal Basic Income proposal negotiates with this reality rather than replacing it.

1. What Australia already spends

In the 2023–24 Final Budget Outcome, Australian Government spending classified as social security and welfare totalled $253.184 billion.

This figure includes pensions, family payments, unemployment-related payments, and other transfers. It does not mean this entire envelope would be replaced by a Universal Basic Income. Much of this spending reflects supports most Australians would want to retain, including disability-related payments and aged supports.

However, the figure matters because it establishes scale. Australia already runs a very large income transfer system. A partial Universal Basic Income would sit on top of, and interact with, this existing structure rather than starting from zero.

2. Gross cost versus net cost

A universal payment always looks confronting at first glance because the gross cost is paid to everyone.

That is not the right budget question.

The real question is net cost, which depends on three things:

• which existing payments are reduced or simplified,
• how much of the payment is clawed back through the tax system,
• and how much additional revenue is raised through reform.

Understanding this distinction is essential to any serious discussion of affordability.

3. A worked example: partial Universal Basic Income

To make the scale tangible, consider an illustrative scenario.

Suppose Australia introduced a partial Universal Basic Income of $10,000 per adult per year.

With roughly 21–22 million adults, the gross cost would sit around $210–220 billion per year.

That figure would then fall once:

• some existing baseline payments are reduced or absorbed,
• higher-income earners repay most or all of the payment through tax,
• and other revenue measures contribute to the funding mix.

This example is not a proposal. Its purpose is to show how the arithmetic works. The budget challenge is always about how much remains after offsets, not the headline gross figure.

4. Two funding pathways: Option A and Option B

Option A: income tax only

(Mathematically possible, politically fragile)

Australian modelling has shown that a Universal Basic Income can be made broadly budget-neutral through radical restructuring of the income tax system. This typically involves:

• reducing or removing the tax-free threshold,
• reshaping brackets and offsets,
• increasing marginal rates,
• then paying the same cash amount to everyone.

Under this approach, most people would pay tax from the first dollar, but receive a large cash payment back.

Why this matters: it demonstrates that universality and clawback can coexist. It makes the arithmetic transparent.

Why it is the least viable path: it concentrates the entire burden into one highly visible lever. It produces sharp effective tax rates for some groups and is politically easy to attack, even when net outcomes are progressive.

Option A is useful as a contrast. It shows why “just pay for it with income tax” is usually where proposals collapse.

Option B: a mixed funding model

(More complex, more realistic)

Option B spreads the load.

It accepts four design principles:

1. Start with a partial Universal Basic Income.
2. Preserve targeted supports for disability, care, and housing.
3. Use income tax primarily for clawback, not sole funding.
4. Fund the remainder through a portfolio of reforms.

This mirrors how Australia has historically built major systems such as Medicare and superannuation. Not all at once. Not from one source.

5. Income tax under Option B: what actually changes

Under a mixed model, income tax does not disappear. It works differently.

Lower and middle income earners retain most of the payment. Higher income earners repay most or all of it through existing tax settings and modest adjustments. This can occur through:

• marginal rate changes at the top end,
• levies or surcharges,
• or changes to offsets that disproportionately benefit higher incomes.

The key point is simple. A Universal Basic Income is universal in payment, but progressive in outcome once tax is applied.

With personal income tax already collecting around $331.5 billion per year, clawback plays a major role in reducing net cost without abandoning universality.

6. Corporate tax: important, but not the engine

Australia collected approximately $141 billion in company tax in 2023–24.

Corporate tax can contribute to funding. However, it cannot carry a national income guarantee on its own. Profit cycles, global competition, and pass-through effects limit how far it can be pushed.

In practice, corporate tax works best as a stabilising contributor alongside integrity measures, rather than the primary funding pillar.

7. Resource royalties: useful, volatile, and structural

Resource royalties are often raised as an obvious funding source. The reality is more complex.

Royalties are largely state revenue. In recent years, minerals sector royalties have exceeded $30 billion annually, but they fluctuate sharply with commodity prices.

Any national role for royalties would require:

• negotiated state–federal agreements,
• or redesigned federal rent-based mechanisms,
• or a long-term dividend-style structure.

A key design principle matters here. Royalties should be treated as counter-cyclical or long-term funding, not annual operating revenue. Otherwise, volatility becomes a risk.

Royalties can be part of the mix. They cannot be the foundation.

8. Superannuation: narrowing concessions, not raiding savings

Superannuation tax concessions are large.

Treasury estimates that in 2024–25:

• concessional taxation of super contributions costs ~$29 billion,
• concessional taxation of super earnings costs ~$22 billion.

Governments are already moving in this space, particularly for very high balances.

The policy logic here is not to reduce retirement adequacy. It is to narrow concessions that overwhelmingly benefit the top end of the distribution and redirect part of that support toward a universal stability floor.

9. Tax concessions that are big enough to matter

Some concessions are large enough to affect UBI feasibility.

Examples include:

• rental deductions at around $26.5 billion,
• the capital gains tax discount at around $22.7 billion.

Treasury is clear that removing concessions does not automatically yield the full headline amount. Behaviour changes. Substitution occurs.

Even so, these figures show that meaningful revenue sits in structural settings, not marginal tweaks.

10. Would a Universal Basic Income save money elsewhere?

Some savings are real. Some are plausible. Most are slow.

Likely areas include:

• reduced administration and compliance costs,
• lower demand for crisis services,
• reduced downstream health and justice pressures.

Even modest percentage reductions in these areas can amount to several billions over time. However, these should be treated as downstream benefits, not upfront funding sources.

The fiscal case rests on prevention. Preventing crisis is cheaper than managing it after the fact.

The real decision

The real policy choice is not between a full Universal Basic Income and nothing.

It is between continuing to manage insecurity through crisis responses, or investing earlier in a stable income floor and managing the trade-offs openly.

Option A shows the maths, and why income tax alone is politically fragile. Option B accepts complexity and stages reform. It spreads costs, preserves core services, and builds trust over time.

Australia can afford a partial Universal Basic Income if it chooses to do so carefully. The question is not whether it is possible. It is whether we are willing to shift from reacting to instability toward preventing it.

This is the second article in a series on income security and long-term stability in Australia. The next piece will examine the social and economic benefits of a partial Universal Basic Income, alongside the risks that must be actively managed, particularly housing and price pressure.