Changes in the Australian taxation system are discussed in reference to two central issues: (1) achieving horizontal and vertical equity within the tax-transfer system; and (2) interrelating taxation and social security systems. Horizontal equity embodies the principle that those in similar economic circumstances should pay the same levels of taxation. Vertical equity embodies the principle that those whose income is greater (after adjusting for horizontal equity considerations) should pay relatively more tax. Both the taxation and social security systems have been recognized as alternative and complementary means of achieving certain objectives (especially in achieving vertical equity), and the overlap of various provisions in either system recently is recognized as problematic (especially as they create poverty traps and work disincentives). However, little discussion of the need to include the social security system has occurred in the current context of reforming the taxation system. The same may be said regarding the need to support, or at least treat equitably, families raising children, especially those on low incomes. This discussion, then, focuses on two main propositions: families with children require adequate support through the tax-transfer system; and such support should be provided through an integrated tax-transfer system. (RH)