This could be an election winning play by Treasurer Jim Chalmers or his opposite number Angus Taylor, if either number cruncher promises tax indexation!

To the average person, tax stories are indeed taxing, especially if words such as indexation and bracket creep are used. However, if an average Aussie who now has a top tax rate of 30 cents in the dollar is told they’ll pay 37 cents in six years’ time, then you might get the “what the?” reaction.

Yes, this is the figuring former boss of the Productivity Commission, Michael Brennan (now CEO of e61 Institute, which was born from a motivation to bring together problem-solvers from academia, industry and government to push the knowledge frontier so we can tackle big problems facing our society.). Brennan says this automatic tax take impost on people’s pay could be stopped by Treasurer Jim Chalmers or whoever follows him by introducing tax indexation.

This is the way a treasurer would stop bracket creep that eats into our increases in income.

Let Investopedia explain: “Bracket creep is a situation where inflation pushes income into higher tax brackets, resulting in an increase in income taxes but no increase in real purchasing power. It is one result of a tax system which features a number of tax brackets. Bracket creep is usually defined as the process by which inflation pushes wages and salaries into higher tax brackets.”

So, if there’s inflation and you get a pay rise, that extra money pushes you into a higher tax bracket and you then pay extra tax. It’s loss to you and a windfall to the treasurer.

The AFR’s Michael Read explained the benefits of indexing the tax brackets neatly. “Raising the tax brackets in line with annual inflation or wages growth would effectively deliver workers a nominal tax cut on July 1 every year, regardless of which major party held office, rather than sporadically every few years when it was deemed affordable,” he wrote.

Economist Chris Richardson told the AFR that the average full-time worker on $135,000 currently ends up in the 30% tax bracket. However, with inflation and no indexation of the brackets, they’ll end up in the 37% bracket by 2031!

The problem of this potential solution to ‘bracket creep’ (as you creep into higher tax brackets) is that it will rob the nation’s treasurer of easy money that helps repair budget deficits.

If a Treasurer did a Star Trek and ‘went where no treasurer has ever gone’, it would mean they’d actually have to make hard decisions not to spend or waste money to eradicate big budget deficits.

And this underlines the problem of the upcoming election because both sides of politics will be offering heaps of expensive promises that will largely be paid for by bracket creep!

This tax indexation is such a neat trick that the average voter doesn’t understand, so you can see why treasurers have avoided it. Read says 21 out of the 35 OECD countries ‘play’ the same taxing game as Australia.

However, it means 14 OECD countries do give a virtual tax cut each year with inflation pushing up the starting amount for a tax bracket by what inflation has been.

If the 30% tax bracket started at $100,000 and inflation was a huge 10%, then the bracket would be pushed up by 10% of $100,000 or $10,000. The 30% tax rate or bracket would then start at $110,000 and lots of taxpayers wouldn’t be hit by bracket creep that taxes too much of any pay rise.

No side of politics is talking tax cuts, but this is early days in the unofficial election campaign. Richardson suggests something like tax indexation is harder to deliver when the Government is spending at 27.2% of GDP, a number that hasn’t been seen since the Whitlam years.

Treasurer Chalmers points to the stage three tax cuts that did lower the average tax rate and helped Australians cope with the big inflation coming out of Covid. But ‘bracket creep’ is the way treasurers get back the money they give in tax cuts. This windfall bankrolls too much spending linked to promises made to get political parties elected.

It’s why I’ll be surprised if we hear anything about tax indexation to kill bracket creep from our political representatives between now and May 17. Isn’t it time to address some of these unfair tax matters?

Last year, leviathan property developer and builder Tim Gurner copped a media backlash when, according to Euan Black in the AFR he “claimed workers had taken their foot off the gas pedal since the pandemic”. And while manufacturing and mining bosses said he was on the money, the court of public opinion threw the book at Tim!
In support of Gurner’s view, the Minerals Council of Australia chairman Andrew Michelmore, who has more than 35 years’ experience in senior leadership roles in Australia, told The Australian Financial Review that office workers in certain parts of the economy were enjoying “a lifestyle that was not sustainable”.
However, the criticism from non-businessowners actually went global, with US politicians weighing into the argument over the expectations of new age workers.
With this in mind and at a time when old school business builders are worried that workers aren’t on the same page as their bosses, comes this story in today’s AFR with the headline: “Start-ups reject work-life balance ‘beast’.”

The newspaper’s Maxim Shanahan and Paul Smith at The AFR’s Entrepreneur Summit in Sydney yesterday tell us businessowners in start-ups argue that “workers must be prepared to ‘‘go to war’’, to help their companies succeed, rather than worrying about work-life balance.”
Anyone who has owned a business might understand this sentiment, but new laws are coming that will mean ‘warring’ entrepreneurs might have to go into battle with part-time fighters/employees!
Why? Well, the lawyers at claytonutz.com explain it this way: “The right to disconnect permits an employee to switch off and refuse to respond to contact or attempted contact from their employer (or a third party like a client, where the contact or attempted contact relates to work) outside their working hours, unless the refusal is ‘unreasonable’.
“It was pared back from an original proposal which would have seen employers banned from making contact with employees outside their usual working hours. Employees can exercise this right from 26 August 2024 (small business employers are exempt from the operation of the provisions for 12 months following their commencement, that is until 26 August 2025).”
This law change is certainly at odds with the sentiments of two successful entrepreneurs who spoke at the AFR Summit.
The reporters quoted Honey Insurance founder Richard Joffe and Goterra boss Olympia Yarger, who said tech workers needed to realise that “to succeed in a start-up, you’re not optimising for work-life balance”.

‘‘This idea that you can be in an exceptional environment and create wealth while sitting on the beach and finishing at five is just nonsense,’’ Joffe said. ‘‘I think the worst thing you can do is pretend to people that [working at] an early-stage company is a cakewalk, that it’s a ping pong table, and it’s a joke.’’
To use a quote I relied on yesterday (but is again appropriate), people who are risking their reputation, their money and their life in trying to build something important want committed employees.

On the other hand, employees, who don’t share the dreams and the profits of an entrepreneur, see life very differently.
History has shown that it is those entrepreneurs who can select the right people and who provide enlightened leadership, as well as equity options, are the ones who get the employees who make business success happen.

Great business leaders not only learn to deal with employees who aren’t the right fit, they also learn to deal with governments who don’t really understand the importance of job creators, worker trainers and big taxpayers.
One way an entrepreneur gets buy-in from their staff is to underline the importance of the business.
The AFR says the CEO of Goterra, Olympia Yarger, runs “a Canberra-based start-up that grows fly larvae and uses them to convert food waste into protein and fertiliser. It works with customers including Woolworths.”

She only keeps staff who she implies are effectively made of the right stuff. ‘‘The more traditional approach to work-life balance doesn’t exist at Goterra. We believe we’re in a climate crisis, and you don’t take work-life balance during a climate crisis,’’ Ms Yarger said.
‘‘That’s an upfront conversation we have with staff, so we’re attracting the sort of people who want that kind of work environment.”
We live in a new world with new age concerns for employees and their overall happiness, so it’s going to take a special group of entrepreneurs to create great businesses while not having a “we’re at war” mentality.

The likes of Steve Jobs and Elon Musk were “at war” leaders. Bill Gates was famous for 2am phone calls to his key staff, so the new age entrepreneurs will have to be outside-the-square thinkers to win at business and provide a winning life for their workers.