Independent MP Allegra Spender has put forward a bold proposal to reform Australia’s income tax system, aiming to address what she describes as “intergenerational inequity.” Her plan suggests shifting the burden of personal income tax from younger workers to older Australians who benefit from property tax breaks, particularly through negative gearing. This proposal comes ahead of an economic roundtable scheduled for March 2024, where tax reform is expected to be a major topic of discussion.
Spender, the only independent MP invited to this high-profile roundtable, represents one of the wealthiest electorates in the country. She argues that the current tax system disproportionately favors those investing in property over individuals who rely on wages. According to her, the focus should be on supporting working Australians rather than providing substantial tax advantages to property investors.
The proposed dual income tax system would treat income from work and investment separately. Currently, property investors can offset losses from their investments against their taxable income from work, a practice known as negative gearing. This effectively reduces their overall income tax liability. Spender’s plan seeks to end this practice, which she believes exacerbates the financial challenges faced by younger Australians.
Concerns over the existing tax structure have been echoed by former Treasury Secretary Ken Henry, who referred to the current system as an act of “intergenerational bastardry.” He argues that the wealth gap between generations is widening, and reforms are necessary to create a fairer tax landscape.
The upcoming economic roundtable will see 23 attendees discuss various tax-related issues, with Spender’s proposal likely to be one of the most contentious. Business groups have already expressed opposition to a Productivity Commission recommendation advocating for a significant cut in the corporate tax rate for companies with a turnover of less than $1 billion. This would be offset by a new cash flow tax of 5 percent, raising concerns about its impact on small businesses.
Moreover, fellow independent MP Kate Chaney has suggested increasing the Goods and Services Tax (GST) to 15 percent and applying it to fresh food. She proposed compensating adults with an annual payment of $3,300 to mitigate the effects of this increase.
As discussions continue, the implications of Spender’s proposal could reshape the tax landscape in Australia significantly. Advocates believe her approach could alleviate some of the financial burdens on younger generations while creating a more equitable system.
