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Alarm sounded over long-term effects of tax cuts

Broad tax reform is being urged amid concerns new cuts will cost working Australians more across the decade.

Independent MPs are calling on the Albanese government to consider wide-ranging changes to address bracket creep.

This happens when rising incomes cause people to pay an increasing proportion of their income in tax, even though there might not have been changes to rates and thresholds.

Kate Chaney and Zoe Daniel
Independent MPs Kate Chaney (left) and Zoe Daniel are worried about bracket creep down the track. (Mick Tsikas/AAP PHOTOS)

Indexing tax brackets to prevent bracket creep could help prevent Australians from losing out in the future, independent federal MP Zoe Daniel said.

It would also prevent the "ridiculous situation" where the brackets creep up and the government then gets to announce a tax cut, she said.

"Everything needs to be on the table," Ms Daniel told ABC Radio on Tuesday.

"We have a situation where we have an ageing population, over-reliance on income tax (and) inadequate revenue from our natural resources."

There was broad support for Labor's revamped stage three tax reforms in her community, she said, but she was holding off on declaring her official position while she continued consultations.

Labor's changes essentially reduce the planned tax cut for higher earners to increase the amount those on lower to middle incomes receive.

Prime Minister Anthony Albanese on Friday.
Anthony Albanese is planning a blitz of regional centres to explain the stage three changes. (Mick Tsikas/AAP PHOTOS)

Independent MP Kate Chaney backed indexing tax brackets and an "everything on the table" review of the tax system.

She also supported the new stage three package on balance.

If the government backflipped on its stage three position, it might as well use the opportunity to have that broader conversation and take something meaningful to the electorate, independent MP Allegra Spender said on tax reform.

An extra $28 billion from tax receipts going into the government's coffers in the next decade meant more would be taken from Australians as wages increased and they jumped into higher tax brackets, Opposition Leader Peter Dutton said.

"By 2033, four million Australians will lose out simply because they are hardworking and aspirational," he said.

Prime Minister Anthony Albanese defended his decision to change the stage three reforms, saying he was prepared to make the difficult decisions for the right reasons.

Bridget McKenzie
Opposition MP Bridget McKenzie says the tax cut changes do nothing to address inflation. (Mick Tsikas/AAP PHOTOS)

"We have targeted this fairly and squarely at middle Australia," he told reporters in Townsville.

While the opposition has attacked the government for breaking an election commitment, it has not finalised a position on whether it will support the changes, with shadow cabinet set to meet in Perth on Tuesday.

But the coalition has branded the move a cynical political manoeuvre ahead of an upcoming by-election.

Anglicare Australia has written to the opposition urging them to back the new tax package.

The charity's executive director Kasy Chambers said the original design of the cuts would have left behind the country's most disadvantaged.

"The opposition can support spending on the country's wealthiest areas - or they can back changes that give cost-of-living relief to their constituents who actually need it," she said.