MORE assistance is on the way for middle-income workers grappling with the burdensome cost of living, courtesy of more generous income tax cuts. Unveiling the intricacies of the revamped stage three tax cuts during a national address, Prime Minister Anthony Albanese staunchly defended the shift in policy as the “right thing to do.”
Emphasising the need for economic adaptability at the National Press Club earlier today (Thursday, January 25), Mr Albanese said, “When economic circumstances change, the right thing to do is change your economic policy.”
The Prime Minister reiterated his commitment to implementing the stage three cuts in full, as initially devised five years ago under the Coalition Government. The changes usher in reduced taxes for all taxpayers, with 90 per cent receiving a larger cut than initially promised, albeit with a halving of the benefits for those on the highest incomes.
Under the changes, a person earning an average wage of $73,000 will get a tax cut of more than $1,500 a year. Contrarily, the stage three tax cuts for those earning $200,000 will witness a reduction from $9075 to $4500.
When the Coalition introduced the stage three tax cuts in 2018, the Australian economy was expected to experience robust growth amid favourable global conditions, with expectations of sustained low inflation and interest rates.
Quoting Treasury advice, Mr Albanese pointed out, “Unanticipated global events meant these projects have not come to pass.” He said the onslaught of a global pandemic, recession, disrupted supply chains, conflicts, rising inflation, and global uncertainty has shifted the economic landscape.
“And if we were to simply proceed with the old plan – promoted before any of these challenges even existed, it would mean middle Australia missing out on the help they need and they deserve.”
Addressing concerns regarding potential inflationary pressures stemming from the revised tax plan, Mr Albanese reassured that both Treasury and the Reserve Bank foresee a broadly neutral impact on inflation. Nonetheless, the opposition contends that Mr Albanese has backtracked on promises and is fostering class warfare.
Deputy Opposition Leader Sussan Ley, speaking on ABC radio, argued, “A more generous tax cut for one Australian should not come at the expense of what another Australian was promised.” She also expressed reservations about employing tax brackets to address cyclical challenges, like the cost-of-living crisis, emphasising their prolonged inflexibility.
Under the Labor Government’s recalibrated scheme, the lowest income tax rate will see a reduction from 19 to 16 cents in the dollar, alleviating the tax burden on the initial $45,000 earned. The low income threshold at which the Medicare levy kicks in will also be increased.
The second tax rate will undergo a reduction from 32.5 to 30 per cent for individuals earning up to $135,000. The 37 per cent rate will be retained for those earning over $135,000, while the top tax rate of 45 per cent will come into effect at $190,000 instead of $180,000.
