The unconventional case for tax reform

The 2022 Federal Election demonstrated that the Liberal Party faces an identity crisis, particularly amongst younger Australians. Just 27% of millennials voted for the Coalition in the 2022 election. We cannot assume as young Australians grow older, their voting preferences will favour the Liberal Party, as this has not (and potentially will not) eventuate.

The Liberal Party must possess a platform that young Australians can identify with, whilst keeping to its values of minimising the influence of Government in our daily lives. This is the message we must send through our policies.

As a result, the case for broad scale tax reform could not be any stronger.

PAYG employees in Australia face the highest personal income taxes in the OECD, with the exception of Denmark, with personal income taxes contributing around 47% of Government revenue. The crisis facing Australia is laid bare in an analysis of the tax liability between a PAYG employee and a shareholder with franked dividends.

For someone earning a salary of $100,000, they will pay around $23,000 in personal income tax, compared with a shareholder who will pocket $5000 from the ATO if the Australian company they invest in pays out $100,000 in fully franked dividends.

Young Australians, as predominantly PAYG employees, will face an increasing tax burden if the system remains rigged against them. This is an opportunity for the Liberal Party to reduce the tax burden on young Australians and make our tax system fairer and more efficient.

The Liberal Party’s platform should include:

1. Legislating personal income tax brackets to keep in line with inflation and finally remove bracket creep that punishes aspirational young Australians as they gradually attain higher paying jobs

2. Increasing the tax-free threshold to the national minimum annual wage of $42,401 and keep it in line with inflation.

Part of the conversation around tax reform is shifting the burden of tax from PAYG employees to those who earn income from wealth. Here is how that could look:

1. Increase the GST to 15% and broaden the base

2. Remove generous tax concessions for superannuation and limit balances to $3 million

3. Halve the capital gains tax discount to 25%

4. Scrap negative gearing on existing properties to encourage investors to purchase new properties rather than competing with owner-occupiers for existing ones.

5. Reform the dividend imputation credit system to remove the concession for investors who do not pay income tax

Young Australians are aspirational who should find themselves and their values aligned to Liberal party. With significant changes to our tax system, the Liberal Party can once again represent those who Menzies sought to fight for - ‘the forgotten people.’