Highlights

  • The PBO projects the average personal income tax rate climbing from 24.9% in 2026-27 to 28.6% by 2036-37, mostly through bracket creep.
  • Personal income tax receipts are projected to grow from 47.9% to 53.8% of total federal revenue over the same decade.
  • The Coalition's income tax plan would cost $9.7 billion over four years and is backed by $31.3 billion in proposed savings costed by the PBO.
  • The Greens have pitched lifting the tax-free threshold from $18,200 to $26,000, worth up to $1,092 a year, at a PBO-costed annual cost of $22 billion.

Australians are on track to hand over a record share of their income in tax over the next decade, even if no new tax is ever legislated. The Parliamentary Budget Office's medium-term outlook projects the average personal income tax rate climbing to 28.6% by 2036-37. That projection sits underneath a live political fight, with the Coalition pushing to index tax brackets and the Greens pitching a higher tax-free threshold.

What the PBO Projects for Personal Income Tax

The PBO projects the average personal income tax rate rising from 24.9% in 2026-27 to 28.6% by 2036-37, assuming no new tax policy. It says most of that rise comes from bracket creep. Bracket creep happens when wages rise with inflation or productivity but the dollar thresholds in the tax scale stay put. More of each pay rise is taxed at higher marginal rates, so the average rate drifts up without any vote in Parliament.

The outlook also shows how much more of the budget would rest on workers. Personal income tax receipts grow from 12.6% to 14.7% of GDP over the decade, and from 47.9% to 53.8% of total revenue by 2036-37. On those projections, more than half of all federal revenue would come from individuals' income tax by the mid-2030s.

The Coalition's $9.7 Billion Indexation Plan

The Coalition's income tax policy would index tax brackets and scrap Labor's $250 Working Australians Tax Offset at a combined cost of $9.7 billion over four years. On 26 October the ABC reported that the PBO had costed the Opposition's proposed savings at $31.3 billion to cover it. The package is a proposal from Opposition, not law. The costings are also incomplete, excluding migration cuts, the pledge to scrap Labor's tax cuts, and reversals of enacted capital gains, negative gearing, trust and super changes.

The Greens' Rival Answer: a $26,000 Tax-Free Threshold

The Greens are pursuing a different fix. New leader Senator David Shoebridge used a National Press Club speech on 28 October to pitch lifting the tax-free threshold from $18,200 to $26,000. According to the ABC, that would be worth up to $1,092 a year, or $21 a week. The Greens would add the same amount to JobSeeker, student, carer and age pension payments. The PBO costs the whole package at $22 billion a year. Like the Coalition plan, it is a proposal requiring legislation.