A Teal MP's plan for a significant package of budget-neutral tax reforms to the personal tax system to better reward hard work, build prosperity, and ensure more people "can build financial security and a decent life for themselves"

Teal MP Allegra Spender (Wentworth, NSW) has unveiled her independent tax reform plan. It is big and comprehensive but only part 1 of 3.

She says the Parliamentary Budget Office costings show that it will be largely neutral to government revenues.

What it does do however, is bring in a huge intergenerational rebalancing by lowering income tax for most full-time employees by more than $1,600 each year, and bringing in higher levies on capital gains, trusts and phasing out negative gearing.

The full Plan is here. This is her summary:

The goal of the proposed tax package is to help young people to achieve financial security, including by rewarding
effort and encouraging participation, to ensure our tax system is more resilient to demographic trends, and is better
balanced towards taxation at a time of life when people are most able to pay.
The package I am proposing in this White Paper cuts tax rates on labour income, but maintains budget neutrality by
reducing many of the tax concessions on investment income and increasing the tax paid on income routed through
family trusts to family members with lower tax rates.
Overall, this paper proposes five key changes to rebalance the tax system to reduce taxes on working income:
• Cut the lowest marginal rate to 13 cents, and cut 2.5 cents off all the other marginal tax rates, slashing the tax bill
by $1,643 in 2027-28-for someone earning $100,000 a year (close to the median full-time wage)
• Reduce the CGT discount from 50% to 30% for future capital earnings, which would raise revenue to pay for tax
cuts, and reduce the distortions of the current system, while allowing investors in shares and property to continue
to earn positive returns after paying tax and taking into account inflation (existing capital gains tax exemptions for
small business, and investments in startup and innovative businesses will remain in place);
• Tax income from investments at 27.5 cents from the first dollar, so that in effect only wage income qualifies for
the zero tax-free threshold and lowest tax threshold, which would raise revenue to pay for tax cuts, and reduce
the artificial incentives to split income by creating family trusts;
• Only permit deductibility of investment losses against investment gains (such as dividends, rent, and capital
gains), which would raise revenue to pay for tax cuts, and reduce the artificial incentives to borrow to invest,
particularly in housing; and
• Over time align superannuation earnings tax thresholds with thresholds in the income tax system (less a relatively
constant discount), which would raise revenue to pay for tax cuts, but also tether the superannuation tax settings
to clearer principles and thresholds that minimise the temptation for future tinkering.

I have had this package costed by the Parliamentary Budget Office and designed it to be broadly budget neutral. The
reduced taxes on working incomes are matched by higher taxes on some investments, so the overall Commonwealth
budget position is unaffected - as shown in Figure 14.