Ms Spender released the first in a series of tax white papers at an address to the National Press Club on Wednesday, setting out a vision for tax reform to boost productivity and tackle intergenerational equity.
The first white paper focuses on the personal tax system and how younger workers are increasingly relied upon to bear a larger share of the tax burden as the population ages.
Meanwhile, those who earn income from assets typically pay a smaller proportion of tax, despite tending to have far greater wealth, thanks in part to the housing price boom that has left home ownership a distant prospect for young Australians.
"The current tax system is exacerbating intergenerational inequity. Our tax system setting needs to be rebalanced towards effort and ingenuity," she said.
The tax system is not adequately rewarding hard work, it taxes people hardest when they can least afford it, and Australia's ageing population will only make things worse over time if it is not addressed now, Ms Spender said.
Part of that is down to the way the same amount of income can be taxed at different rates depending on if it was earned through wages, capital gains, superannuation, or a family trust, she said.
That has negative consequences for Australia's social compact: the promise that no matter your circumstances, if you work hard, you can build a decent life for yourself, Ms Spender said.
"The question I am asking is have we got the balance right? Is it working for either prosperity or fairness?" she said.
"No. Our tax system imposes its heaviest burden on the one path open to almost all of us: working for a living."
A former consultant with an economics degree from Cambridge, Ms Spender's remedy included cutting the lowest marginal tax rate on wages to 13 per cent and cutting all other marginal rates by 2.5 percentage points.
That would be paid for by lifting taxes on predominantly wealthier asset holders.
She recommended reducing the capital gains tax discount from 50 per cent to 30 per cent, paring back negative gearing, introducing a minimum tax rate of 27.5 per cent on investment income, and aligning superannuation earnings thresholds with income tax thresholds.
