New South Wales Premier Chris Minns has broken with federal Labor to criticise bracket creep and signal support for opposition proposals to adjust income tax thresholds.
Minns said rising tax burdens were eroding pay gains for workers, as inflation and wage increases push more Australians into higher tax brackets.
“The top marginal rate of 47 per cent … you’re working Monday, Tuesday, and half of Wednesday for yourself, and then Wednesday, Thursday, and Friday for the government,” he said.
In an endorsement of Opposition Leader Angus Taylor’s proposal to index tax brackets to inflation aimed at limiting bracket creep, Minns said families were being “stung” as higher wages translated into less take-home pay, pointing to recent state wage agreements for nurses, paramedics and teachers.
“Whether it’s in this budget or it’s in the future, we do need to make sure that we’re doing everything we can to hand more money back to working Australians,” he said.
Bracket creep occurs when inflation pushes taxpayers into higher bands without a corresponding increase in real purchasing power.
Under Taylor’s proposal, lower tax thresholds would be indexed to inflation from 2028–29, with higher brackets to follow later. The opposition says the plan would leave the average taxpayer about A$250 better off in the first year, rising to around A$1,000 annually over time.
Treasurer Jim Chalmers has criticised the policy, warning it could add to inflation if implemented at the wrong time.
Australia operates a progressive tax system, where higher rates apply only to income within each bracket rather than total earnings.
The pushback comes after Treasurer Jim Chalmers unveiled major tax hikes to family trusts, capital gains tax (CGT) and negative gearing, breaking a prior election commitment not to alter the settings.
Under the tax hikes, the 50% CGT discount for assets held longer than a year will be replaced by an indexation model from July 2027. Investors would instead pay tax on gains at their marginal income tax rate, up to 47%, with a 30% floor.
The budget also targets discretionary trusts, commonly used by small businesses, tradies and investors.
From July 2028, income generated within such trusts will be taxed at 30% before distribution, with a non-refundable credit applied to beneficiaries.
In some cases, including where beneficiaries are legal entities, the changes could result in unusually higher effective tax rates of over 60% due to the interaction with other tax settings, experts say.
Last week New Zealand Finance Minister Nicola Willis struck a light-hearted tone on Friday, invoking a famous Australian tourism slogan as she extended the invitation.
“Where the bloody hell are you? Come over!” she said, echoing Australia's 2006 campaign line.
