This paper provides an overview of the interrelationships between the taxation and social security systems in Australia. The paper describes the interaction between the two systems in terms of the overlaps between income tests and the income tax rate scale and common populations. The paper then discusses objectives common to the taxation and social security system, referring particularly to assistance for families, tax expenditures and assessment of the redistributive impact of current arrangements. The paper reviews two recent suggestions for change - the proposed introduction of a broad-based consumption tax and proposals to income-test the tax threshold - and assesses the compensation packages associated with these reforms. The paper then outlines how possible poverty traps develop because of the interaction of the two systems and canvasses some approaches to alleviating these poverty traps. The paper concludes that the growing interaction of taxation and social security reflects both conscious policy changes and economic and social developments, which mean that the issues identified will remain of concern for some time to come.