The federal cabinet has signed off on a proposal to shift the benefit of the stage 3 tax cuts towards middle and lower income earners and will present the plan to Labor MPs at a caucus meeting this afternoon.
The cuts are the last round of a tax reform package passed with bipartisan support in 2018 — but while Labor backed the first two stages which benefited lower income earners, the party only reluctantly agreed to the final stage.
As it stands, the cuts would flatten tax rates so that all income earned between $45,000 to $200,000 was taxed at a rate of 30 per cent.
It would mean:
- A 2.5 percentage point reduction in the tax rate on earnings between $45,000 and $120,000,
- A 7 percentage point reduction in the tax rate for earnings between $120,001 and $180,000, and
- A 15 percentage point cut on the tax rate for earnings between $180,000 to $200,000
Workers earnings over $200,000 would pay $9,000 less in tax each year once the cut takes effect in July.
Prime Minister Anthony Albanese says the plan being taken to caucus today will increase the support offered to middle Australia.
The Liberal Party has responded with outrage at the prime minister breaking a pre-election promise not to touch the tax cuts, which were a signature reform of the then-Liberal government.
Deputy Opposition Leader Sussan Ley said Mr Albanese was a liar.
“I remember him looking straight into the eyes of the Australian people and saying, ‘My word is my bond and I won’t change the stage 3 tax cuts’. But … this was the plan all along. The election was won on a lie,” Ms Ley told Sky News.
“Every single Labor MP lied to their community, and they need to stand up and explain that today.”
Ms Ley said the backflip on the government’s promise reopened questions on what else the government was prepared to change that it had previously promised would be left alone.
She noted the change was coming as the government heads towards a by-election in the Victorian seat of Dunkley, which was held by Labor MP Peta Murphy until her death late last year.
“What’s so disappointing is it’s not about economics, it’s not about an economic plan, it’s all about the politics,” Ms Ley said.
Shadow Minister for Foreign Affairs Simon Birmingham, who was finance minister in the previous government, said the stage 3 cuts fit into a package of reforms that had been carefully calibrated to address years of bracket creep.
“There are twice as many Australians in the top [$180,000] income tax bracket today than when the threshold was set for that bracket,” Senator Birmingham said.
“If it’s not changed, more and more Australians will be pushed up into that tax bracket over the years to come … you might be a little bit better off today, you likely will be worse off in the long run.”
The federal government will need the support of the Greens and a number of crossbenchers in the Senate in order to amend the tax cuts.
Greens senator Nick McKim said his party was not prepared to declare its position when it had not yet seen Labor’s proposal, but it was open to changes that would help people earning the lowest wages.
“We understand the pressure that people are under, we need more than just fiddling at the margins,” Senator McKim said.
Sally McManus, secretary of the Australian Council of Trade Unions, said Australians had been smashed by cost of living increases and additional support was welcome.
“It is a government’s responsibility to act when this is happening,” Ms McManus said.
“And the [original] proposal of the stage 3 tax cuts, which would mean the baristas, the hospo workers, the retail workers, the childcare workers of Australia would get absolutely nothing is just not fair.
“We need this action, because the current stage 3 tax cuts are blatantly unfair.”
SOURCE: ABCNEWS
