Treasurer Wayne Swan admits Australia's tax-system needs to be modernised to offer incentives to "hard workers".
The most comprehensive examination of Australian taxes in more than 50 years was formally launched today with the release of a discussion paper.
Treasury secretary Ken Henry will head the review of taxes on work, investment, property, savings and consumption and their impact on individuals, families and retirees.
The discussion paper, Australia's Future Tax System, also will consider the relationship between taxes and an emissions trading scheme.
It sets the framework for the review, which will be completed by the end of next year.
Mr Swan has told 2GB's Philip Clark a new and simpler regime is obviously needed.
"First of all we've got to make sure it's internationally competitive, I mean the world has changed dramatically, in the last 30 years particularly," Mr Swan said.
"We've got to have an eye on international competitiveness. We've got to also have an eye on putting incentives in the system to reward hard work.
"There's a lot of disincentives out there, particularly second income earners when they work a bit of overtime."
Asked if there would be winners and losers, Mr Swan said he was not ruling anything out.
"There are swings and roundabouts in tax reform, everybody knows that, it would be silly to say there are not," Mr Swan said.
"But how we go about changing the system is what this review is about."