Concerns Australians could lose out in the long run with changes to tax cuts have prompted calls for broader and more ambitious reforms.
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 “this ridiculous situation where the brackets creep up and then every few years the government gets to announce a tax cut with largesse”, the inner-Melbourne MP said.
“Everything needs to be on the table,” she 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.
“We can’t pay for the things that we think we deserve, and we need to have a broad conversation about, over the next 20 years, how are we going to pay for this?”
There was broad support for Labor’s revamped stage three tax reforms in her community, Ms Daniel 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.
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”.
“The reality is we are just frozen on tax reform and we can’t actually say you can never change your mind ever on anything,” she said.
“When circumstances change, we also need to be able to change policy.”
If the government backflipped on its stage three position, it may 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 over the next decade meant more would be taken from Australians as wages increased and jump 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.
“The prime minister’s rewriting of the legislated stage three tax cuts, I think is the most egregious broken promise.”
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.
“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 yet finalised a position on whether it will support the changes, with shadow cabinet set to meet in Perth on Tuesday.
But the move has been branded a cynical political manoeuvre ahead of an upcoming by-election.
“The prime minister has trashed his reputation to bribe voters in Dunkley,” Nationals frontbencher Bridget McKenzie told AAP.
The three tranches in conjunction would have provided tax relief and a simpler and fairer system over the next decade, she said.
“These changes walk back the relief that would have been provided to Australians for the next decade … and actually do nothing to address the real problem, which is home-grown inflation.”
Bracket creep happens when rising incomes cause people to pay an increasing proportion of their income in tax, even though there may not have been changes to tax rates and thresholds, according to the Parliamentary Budget Office.