Calculating the business cost of Australia’s new 'productivity tax'

It’s hard to understand how two similar businesses established with exactly the same parameters at the same time could enjoy such different levels of productivity.
That aside, in my opinion the comparison of the two businesses measures the wrong thing, which is the level of tax paid. The correct thing to compare is the net capital return, the high productivity business has a marginal positive capital return of $1.586M over the low productivity business in spite of the much higher effective tax rate. In addition it has enjoyed much higher profitability on the way through.
I know which business I would have preferred to own, regardless of effective tax rate.

Could not agree more. The data has an in built and purposeful bias, and distorts the reality of the two situations. You could apply the same mathematical logic to basic personal incomes, Person A earns $2M and pays $900K income tax, Person B earns $1M doing the same job and pays $400K tax. Which person do you want to be, A with $1.1M in his pocket or B with $600K?

So if a higher tax rate disincentivises, we should see progressive PAYE having the same effect... but weirdly enough, folks still want to earn more money.
Rich/greedy folks, of course, spend a lot of time and effort arranging their affairs to avoid paying as much tax as poorer people - which is probably what your hypothetical multimillionaire cleaning couple will do.

Funny, I thought productivity was a measure of output over input, not growth.

Indonesia has far and away lower taxes and commensurately less services, this country was a shining example of an egalitarian system but it lowered the share of the pot for capital holders post war and increased the share to labour to the highest level of all times some suggest, this egalitarianism is gone and we have a burgeoning homelessness problem that even extends to housing strain on a registered nurse living in Western Sydney or similarly the Northern or Western suburbs of Melbourne earning $90k pa who still has a HECS debt when previously for late boomers it was free for a period and the chance of the nurse being able to buy her self a house is slipping away from her rapidly.

Now we hear howls of complaint when a tiny tinkering of the balance is being attempted after the very large transfer of wealth to capital in the last 30 years. What sort of country do we want, an egalitarian country like I grew up in or an American style country were you go bankrupt for medical care if unemployed hence uninsured?

We did not grow up in an egalitarian country. We grew up in a country of opportunity. The only way everyone's wealth in this country can recover and then grow is through the effective investment of Capital. This is now under aggressive attack. Opportunity is being suffocated.
We all have differing capabilties, talents, interests, hopes, dreams, desires, work ethic, priorities, discipline, intellect and energy.
The notion that everyone has to somehow be 'equal' is ridiculous. It has failed every single time regimes have attempted to engineer it throughout history.
You are where you are in life because of the decisions you have made.

Alex, it is equal opportunity that was available in the past and is lacking today and even being equal in the eyes of the law could be said to have disappeared also as representation is no longer available to all.

These are both very productive case studies, with even the supposed low productivity having a large increase in profits and a subsequent capital gain.
If the couple paid the amount of tax in the worked examples they would be very poorly advised by their accountant. There are various concessions that apply when a small business is sold where the capital value is under $6 million.
https://www.ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/incentives-and-concessions/small-business-cgt-concessions/small-business-cgt-concessions-eligibility-conditions
A bigger question is what is a fair rate of tax to pay if your investment value increases nearly 10 fold in a five year period. Pretty academic in any case for a husband and wife cleaning team in their 30s!

Why should it be any different to two employees working for the same company? One worker stays in the same role for 5 years and the other increases their qualifications and subsequently gets promoted with commensurate increase in income and tax bracket.

Absolutely correct. You cannot argue with the disincentive. Plenty of young people start businesses thinking they are going to hit the lights out, and sure most of them don't go on to become 10 baggers or 100 baggers. That's irrelevant, what is important is that people have a go. Now with the expectation of close to 50% tax accompanying any success, there is a huge disincentive to look at doing something else or going somewhere else.

Whatever came of the productivity summit anyway?

Higher taxes.

Yep.
This is definitely gonna convince the faithful to give up their motivations and live on Centrelink!
Earn more money, pay more tax, enjoy both the benefits- higher personal income/wealth and a more prosperous society