Thu May 14

Angus Taylor promises to index income tax to inflation in big tax gamble

Written by: Michelle Grattan, Professorial Fellow, University of Canberra

Opposition Leader Angus Taylor has committed a Coalition government to phase in income tax indexation under a “tax back guarantee” that he says “will fully protect all taxpayers from inflation”.

In his budget reply on Thursday night, Taylor described the plan, which would cost $22.5 billion over the forward estimates, as “generational tax reform”.

“It’s fair, simple, and honest. It will back Australians to work hard, take risks, and invest in their future. It will force government to respect your money.

"Any government that wants to tax Australians more should have the courage to front up and to take that tax increase to an election.”

Under the proposal, from 2028-29 a Coalition government would index the bottom two thresholds to inflation.

Taylor said this would “fully protect” 85% of income earners, with $250 in year one and growing to more than $1,000 annually in the fourth year.

From 2031-32, the top two thresholds would also be indexed.

“That will fully protect all taxpayers from inflation.”

Tax indexation was introduced by the Fraser government in the 1970s but that government wound it back then abolished it.

Taylor wanted the opposition to adopt indexation before the 2025 election but then Opposition Leader Peter Dutton, who floated the idea in the campaign, did not present it as a policy.

Taylor, clearly with eyes on One Nation’s electoral surge, reflected in its victory in the weekend Farrer byelection, presented a hardline policy on welfare.

Non-citizens would be denied access to 17 benefits and payments and to the National Disability Insurance Scheme.

“We will remove Labor’s handouts for non-citizens.

"Many Australians would be surprised to learn that non-citizens are eligible for welfare,” Taylor said.

The programs included Jobseeker, Youth Allowance and the Family Tax Benefit.

He said excluding non-citizens would save billions of dollars but did not give a firm estimate.

On immigration, Taylor told the House of Representatives a Coalition government would cap the intake based on the numbers of homes constructed each year.

“Never again will a government be able to bring in more people than our housing can support. That’s our commitment.”

He said given the number of people coming in under Labor, the intake under the Coalition would need to be “significantly below our cap in the first few years of a Coalition government. We must allow the housing market to catch up”.

But he avoided giving a specific number, saying “only closer to the next election can we provide a precise immigration number. It would be rash to do so now”.

He added, however, “The Coalition will deliver one of the biggest cuts to immigration in Australian history. Our immigration cut will complement our plan to lift immigration standards”.

Taylor reaffirmed the Coalition’s commitment to spend at least 3% of GDP on defence, and said it would appoint a dedicated National Security Adviser.

Taylor said the things holding Australians back and leaving Australians behind were:

“mass migration”, that was changing Australia for the worse, with the number of people coming exceeding the housing being built
prioritising net-zero and emissions reduction “above all else” which had led to soaring power prices
a “blind faith in globalisation” that had hollowed out vital industries, making the country vulnerable
the mistaken belief that “bigger government is the solution to every problem”.

“Anthony Albanese promised that you would be better off under big Labor government. But big government hasn’t led to better government – or Australians being better off.”

Taylor said “Australia has experienced the worst collapse in living standards in the developed world. Moreover, under Labor, economic growth is an illusion.”

He said to encourage business investment the Coalition would allow a business with a turnover of under $10 million, to immediately deduct assets of up to $50,000 on a permanent bias.

He also said where government resource revenues were higher than forecast, the Coalition would bank 80 cents in every dollar in a Future Generations Fund to help pay down debt and invest in infrastructure.

“Twenty-five per cent of funding will be for our regions that have been neglected by Labor. Regions that are home to the natural resources we benefit from.”

Taylor repeated his earlier-announced plan to improve fuel security.

A Coalition government would “work with coal-fired power plant owners to keep them running as long and as hard as possible to get electricity prices down”.

He said “to incentivise more refining capacity, we will make the Fuel Security Services Payment available to companies who can build new refineries.”

Pauline Hanson told reporters before the budget reply “Angus Taylor has no vision for the future and that’s why he’s picking up One Nation’s policies.”