Opposition Leader Angus Taylor has committed a Coalition government to phase in income tax indexation under a “tax back guarantee” that he says “will fully protect all taxpayers from inflation”.

In his budget reply on Thursday night, Taylor described the plan, which would cost $22.5 billion over the forward estimates, as “generational tax reform”.

“It’s fair, simple, and honest. It will back Australians to work hard, take risks, and invest in their future. It will force government to respect your money.

"Any government that wants to tax Australians more should have the courage to front up and to take that tax increase to an election.”

Under the proposal, from 2028-29 a Coalition government would index the bottom two thresholds to inflation.

Taylor said this would “fully protect” 85% of income earners, with $250 in year one and growing to more than $1,000 annually in the fourth year.

From 2031-32, the top two thresholds would also be indexed.

“That will fully protect all taxpayers from inflation.”

Tax indexation was introduced by the Fraser government in the 1970s but that government wound it back then abolished it.

Taylor wanted the opposition to adopt indexation before the 2025 election but then Opposition Leader Peter Dutton, who floated the idea in the campaign,........

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