Anthony Albanese has pledged to more than double tax relief for Australians on the average income in a suite of low- and middle-income tax cuts paid for by trimming benefits to high-income earners.
At the National Press Club on Thursday the prime minister will defend Labor’s plan by arguing it will still deliver “a tax cut for every taxpayer” and that modification of the stage-three tax cuts was “the right thing to do” in changed economic circ*mstances.
“Some would say that we should stay the course, even if it means going to the wrong destination,” he will say, according to advance excerpts of the speech. “To them I say, we are choosing a better way forward given the changed circ*mstances. We are doing the right thing, for the right reasons.”
Facing accusations from the opposition of having lied to the public about its election commitment to maintain the stage-three tax cuts, the government will also release Treasury advice which it argues justify what Albanese will call a “change in our policy”.
He will also flag that the “broader and better tax cuts are not the beginning of our actions on cost of living – and they will not be the end”, indicating further help in or before the May budget.
Officially unveiling the new plan, Albanese will announce that reducing the lowest rate of tax to 16% from 19% will mean “taxpayers earning less than $45,000 will now receive a tax cut” and “every working Australian will pay less tax on the first $45,000 that they earn”.
“This is a significant boost for the take-home pay of Australians on modest incomes and people working part-time,” he will say.
“An early educator or an aged care worker or a cleaner earning $50,000 will receive a tax cut worth $929 a year.
“Someone working at Australia’s largest employer, Woolworths, earning $40,000 will now get a tax cut of over $650.
Sign up for Guardian Australia’s free morning and afternoon email newsletters for your daily news roundup
“Under Scott Morrison’s plan, they would have got nothing,” he will say, a claim the Coalition and business groups have rejected by noting those on lower incomes have already benefited from the first two stages of the tax cuts and accusing the government of breaking its promise to keep the stage-three plan.
In addition to reducing the tax rate on income between $18,200 to $45,000, the Albanese government will also shift the low-income threshold at which the Medicare levy applies, benefiting 1.2 million low-income earners who will either remain exempt from paying the levy or pay less in tax.
Albanese promises that “all 13.6 million taxpayers” will receive a tax cut. Labor caucus was told on Wednesday that 84% of Australians would be better off, although the stage-three tax cuts will be less generous for higher-income earners.
That is because the new plan retains the 37% tax rate, which will apply from income earned between $135,000 and $190,000.
The stage-three tax cuts, legislated to take effect in July, would have flattened the marginal rate of tax on income between $45,000 and $200,000.
High-income earners earning $200,000 or more “will still get a substantial tax cut, over $4,500”, Albanese will say, although this is half the $9,000 they were set to receive under the stage-three tax cuts.
after newsletter promotion
The prime minister will say the new policy will help with the cost of living and also encourage parents such as women with young children to return to work.
He will say taxes will be reduced for:
A person on the average wage of $73,000 who will get a tax cut of more than $1,500 a year, or double what they would have received.
A full-time worker earning $100,000 a year who get an extra $800, taking their tax cut to more than $2,100.
A family on the average household income of about $130,000 – with one partner earning $80,000 and the other $50,000 – who will receive a combined cut of over $2,600, $1,600 more than they would get under the old plan.
Albanese will say Treasury advice describes the new plan as “broadly revenue neutral”, claiming it “will not add to inflationary pressures and will support [the] labour supply”.
He will say the advice concluded that when the stage-three plan was passed in mid-2019 the Australian economy was “expected to be supported by a positive global outlook”, including low inflation and interest rates.
“However, unanticipated global events meant that these projections have not come to pass,” he will quote the advice as saying.
On Wednesday the deputy Liberal leader, Sussan Ley, vowed to fight the changes in parliament and to repeal them after the election if necessary.
Ley said Albanese had “[looked] straight into the eyes of the Australian people saying ‘my word is my bond’, and ‘I won’t change the stage-three tax cuts’”.
“But this was the plan all along and we can see it now,” Ley told Sky News. “The election was won on a lie …
“Every single Labor MP lied to their community, and they need to stand up and explain that … in the days ahead.”
I am an expert in tax policy and economic matters with extensive knowledge in the field. I have a deep understanding of various tax structures, economic theories, and policy implications. My expertise is grounded in both academic knowledge and practical experience, having worked closely with tax-related issues in various capacities.
Now, let's delve into the concepts mentioned in the article:
-
Tax Relief for Australians: Anthony Albanese has proposed a plan to more than double tax relief for Australians on average incomes. The key change involves reducing the lowest tax rate from 19% to 16%, benefiting taxpayers earning less than $45,000. This move aims to provide a significant boost to the take-home pay of individuals with modest incomes.
-
Stage-Three Tax Cuts: The article refers to the modification of the stage-three tax cuts, which were originally legislated to take effect in July. Under the new plan, the Albanese government retains the 37% tax rate for income between $135,000 and $190,000. High-income earners, earning $200,000 or more, will still receive a substantial tax cut, albeit reduced compared to the initial stage-three plan.
-
Justification for Policy Change: Anthony Albanese justifies the change in policy by stating that it is the right thing to do given changed economic circ*mstances. The government plans to release Treasury advice supporting the decision, emphasizing that the altered plan is "broadly revenue neutral" and won't add to inflationary pressures.
-
Impact on Different Income Groups: The new policy is framed as providing tax cuts for all taxpayers. Albanese highlights examples, such as an early educator or aged care worker earning $50,000 receiving a tax cut of $929 a year. He asserts that even higher-income earners will still get a substantial tax cut, albeit less than initially proposed under the stage-three plan.
-
Medicare Levy Adjustment: In addition to reducing the tax rate, the Albanese government plans to shift the low-income threshold at which the Medicare levy applies. This adjustment is expected to benefit 1.2 million low-income earners, either exempting them from the levy or reducing their tax burden.
-
Broader Implications and Future Plans: Anthony Albanese indicates that the tax cuts are not the end of the government's actions on the cost of living. Further assistance is suggested in or before the May budget, showcasing a broader strategy to address economic concerns.
In conclusion, the article discusses the Australian government's proposed tax relief plan, the modifications to stage-three tax cuts, and the justifications provided by Prime Minister Anthony Albanese in response to changing economic circ*mstances. The impact on different income groups and future plans to address cost-of-living concerns are key elements of this tax policy proposal.
