Login
iscover
The prime minister is expected to detail revised earnings brackets that deliver greater benefits to low and middle-income workers.
Newsletter
Government to unveil stage 3 tax cut overhaul
25 January 2024
•
10 minute read
Prime Minister Anthony Albanese will present a revised version of the contentious stage three tax cuts at the National Press Club today in a bid to refocus on “middle Australia” by reducing savings for high-income earners.
You’re out of free articles for this month
To continue reading the rest of this article, please log in.
Create free account to get unlimited news articles and more!
The redesign, approved by cabinet on Tuesday and by the Labor caucus on Wednesday, was expected to involve raising the tax-free threshold, taxing lower-income earners at 16 per cent while changing the top 45 per cent tax bracket to $190,000.
“I'll be giving a full exposition of economic policy and our response to provide assistance to middle Australia on cost of living at the National Press Club,” he said yesterday.
“This proposal will be all about supporting middle Australia. We know there are cost-of-living pressures on middle Australia and we’re determined to follow the Treasury advice to provide assistance to them.”
H&R Block director of tax communications Mark Chapman supported the redesign.
“The heavy weighting of the original package towards those on the highest incomes is difficult to justify in the current economic climate and, with the cost of living impacting disproportionately on those low and middle-income taxpayers, this will provide some much needed extra cash in the pockets of hard-working families to pay mortgages, food and fuel bills,” he said.
The cuts were first introduced by the then-Coalition government in 2018 as part of a three-stage package. The first two rounds of cuts benefited low and middle-income households, and the final round, set to take effect in July, would give tax breaks to higher-income earners.
In their original form, the cuts would collapse the 32.5 per cent and 37 per cent tax brackets into a single 30 per cent bracket and the threshold for the top 45 per cent tax bracket would be raised from $180,000 to $200,000.
Mr Chapman said this delivered most of the benefit to those on high incomes, translating into “nothing at all for people earning $45,000, only $875 for people earning $80,000 but a whopping $9,075 for people earning $200,000”.
Radio station 2GB reported on Monday that the government would revamp the cuts, keeping the 45 per cent bracket unchanged but raising the tax-free threshold.
On Tuesday the Australian reported that the 37 per cent bracket would be reinstated but changed from $120,000-$180,000 to $135,000-$190,000.
Sky News said the tax rate for individuals earning between $45,000 and $135,000 would be 30 per cent while income of $19,000-$45,000 would be taxed at a reduced rate of 16 per cent, providing relief to those previously not eligible under the cuts.
The Australian Financial Review said the net effect of the revisions meant those earning up to $150,000 would be better off than they would have been under the currently legislated package, while the benefit for those on the highest incomes would almost be halved.
Mr Chapman said, “those on higher incomes (say, $200,000) will now only benefit by $4,546 (which is still quite generous) as opposed to $9,075”.
“With the cost of the tax cuts package overall expected to remain the same, this means that the tax savings have been distributed much more widely,” he said.
“They are now focused on low and middle-income taxpayers, who were previously not well served by the tax cuts, have been suffering from increases in the cost of living and are far more numerous than the high-income earners.”
You need to be a member to post comments. Become a member for free today!
