The Coalition’s proposed “tax bracket guarantee” has come under fierce criticism from the Albanese Government, with Health Minister Mark Butler accusing the opposition of promising billions in tax cuts without explaining how they would be funded.
In his budget reply speech on Thursday night, Liberal leader Angus Taylor promised a “fairer, freer and better Australia”, unveiling a plan to tie income tax brackets to inflation in a bid to tackle bracket creep.
The proposal would gradually index tax brackets from 2028-29, beginning with the two lower brackets covering Australians earning under $135,000, before expanding to the top two brackets from 2031-32.
The Coalition claims the policy would stop inflation and wage rises from pushing Australians into higher tax brackets, with Taylor arguing average workers have lost about $2000 from their pay packets due to bracket creep.
But Labor seized on the cost of the proposal, with experts warning the changes could cost the budget more than $140 billion over the next decade.
In a heated Sunrise debate, Butler said the Coalition had failed to explain how the government would fund the sweeping tax cuts.
“These might be nice ideas, but at the end of the day, you have to pay for these things,” Butler said.
“Angus Taylor couldn’t say last night how they’d pay for this. Jane can’t say this morning.”
“Frankly, promises like this don’t deserve serious attention until you front up and put the numbers on the table and show taxpayers how this will be paid for,” he said.
Butler contrasted the proposal with Labor’s own legislated tax cuts due to begin on July 1 2026, and July 1 2027, alongside a new $250 Working Australians Tax Offset and a $1000 instant tax deduction announced in this week’s Budget, which he described as “responsible funded tax cuts”.
Deputy Opposition Leader Jane Hume said the Coalition would release its full costings before the federal election, while also accusing Labor of increasing taxes through changes to negative gearing and capital gains tax concessions.
“That’s going to deny future generations, younger Australians, the same opportunities that older Australians have right now,” she said.
She defended the Coalition’s plan, arguing Australians should benefit from wage increases rather than the government.
“The tax back guarantee means that more Australians will have more of their own money in their pocket and the government doesn’t benefit every time inflation goes up,” Hume said.
“Right now, when inflation goes up, when your wages go up, and you move into a higher tax bracket, the government then gets a bigger slice,” she said.
“That’s what the tax bracket guarantee will do, make sure it’s individuals and families that benefit from their wage rises, not the government”.
Hume acknowledged the policy would cost the government more over time, but argued it would help grow the economy in the long term.
“When taxes are lower, you’re encouraged to work that bit harder. Reward for effort is something that the coalition believes fundamentally in,” she said.
“We want to see more people into work, more people taking on more jobs and keeping more of what they earn”.
The policy revives a model abandoned in the 1980s amid concerns about the long-term hit to the budget.
When questioned about whether Australia could sustain the changes, Hume argued the current system was “unsustainable”.
“The alternative is that each and every year Australians get a little bit poorer because inflation and then wage rises get eaten up by taxes every time we move into a higher and higher tax bracket,” she said.
“We want Australians to grow their wealth, become better off over time and get rewarded for the effort they make.”
