Highlights

  • His release said a Coalition government would "put a speed limit on spending, crack down on waste, fraud and abuse, and deliver our Tax Back Guarantee".
  • The Tax Back Guarantee is an opposition policy, announced in the budget reply on 14 May 2026.
  • It is not law and would only proceed if the Coalition wins government and passes legislation.
  • permanently index income tax brackets to the Consumer Price Index;

The International Monetary Fund's latest World Economic Outlook, released at its Annual Meetings in Bangkok on 13 October, has landed in the middle of Australia's tax debate. Within hours, the Opposition used the report to argue for spending restraint and for its own plan to index income tax brackets. Here is how that plan would work, and where the IMF fits in.

What the IMF is reported to have said

Shadow Treasurer Tim Wilson's 13 October release quoted a different IMF line: that for countries with above-target inflation, "fiscal consolidation can moderate demand and complement monetary policy efforts to maintain price stability". start with the two lowest brackets in 2028–29; extend indexation to the top two brackets from 2031–32. The Coalition said the typical taxpayer would be about $250 better off in the first year, rising to about $1,000 a year by the fourth year. It estimated the cost at about $22.5 billion over four years, to be offset by savings measures it would announce before the 2028 election. Those figures are the Coalition's own and have not been independently costed in public.

Hypothetical example: indexing the lowest thresholds

Under legislated rates, the bracket covering $18,201 to $45,000 is taxed at 15% in 2026–27 and 14% from 1 July 2027. Income above $45,000 is taxed at 30%, then 37% and 45% at higher levels. Hypothetical example: a worker earns $60,000 in 2028–29. Assume, for illustration, that "the two lowest brackets" means the $18,200 tax-free threshold and the $45,000 threshold are both lifted by inflation of 3%. The tax-free threshold rises to $18,746. That moves $546 of income from the 14% rate to 0%, saving $76.44. The $45,000 threshold rises to $46,350. That moves $1,350 of income from the 30% rate to 14%, saving $216.00. Total saving: $292.44 for the year. That result depends on the assumed 3% inflation rate and on how the policy is ultimately designed. It ignores the Medicare levy and tax offsets. The answer would also differ at other incomes, which is why it sits only roughly near the Coalition's own "about $250" figure. If inflation were again 3% in 2029–30 and the same worker still earned $60,000, the thresholds would rise to $19,308.38 and $47,740.50. Compared with unindexed thresholds, the saving would be about $593.65 for that year. That compounding effect is consistent with the Coalition's claim that the benefit would build to about $1,000 a year by year four, when the higher brackets would also start to be indexed. In practice, wage growth would move many workers' incomes as well, so the real-world figures would differ.

Labor's alternative and the bracket creep backdrop

Both policies respond to bracket creep, where rising wages push more income into higher tax brackets even when real incomes don't rise. A flat offset gives a set amount to eligible workers, while indexation lifts thresholds every year and so grows in value over time, including for higher earners once the top brackets are indexed.