The Federal Government will roll out an advertising campaign in an attempt to sell the changes it has made to promised stage three tax cuts.
In a speech to the National Press Club yesterday, Prime Minister Anthony Albanese explained why his government had broken its promise to keep the tax cuts as legislated.
“We are doing the right thing, for the right reasons, with a plan that delivers a tax cut for every taxpayer.
“It’s the best way to help Australians struggling with their cost of living without putting pressure on inflation.
“Some would say that we should stay the course, even if it means going to the wrong destination.
“To them I say, we are choosing a better way forward given the changed circumstances.”
The changes are supported by Australian Council of Social Service (ACOSS) CEO Cassandra Goldie, who told Sky News, “These tax cuts were always bad policy and so we congratulate the Albanese Government for listening to the deep concerns expressed by organisations including ACOSS from the very beginning.
“They have now moved to make these tax cuts fairer to be targeting more of the dollars to people who do need help.”
Backflip benefits
It is suggested the backflip will benefit more than 11 million taxpayers and penalise 1.8 million. According to the government, the legislated cuts ignore those earning less than $45,000.
Under the original cuts, those earning between $120,000 and $180,000 would benefit from the abolition of the 37% tax bracket, with workers earning between $45,000 and $200,000 to come under a 30% tax bracket.
Under the new changes, which were rubber-stamped by caucus on Wednesday, the 37% bracket remains and will apply to incomes between $135,000 and $190,000.
A 19% tax rate that applies to incomes between the $18,200 tax-free threshold and $45,000 will be lowered to 16%.
Those earning up to $150,000 are expected to be better off. Someone earning $50,000 will receive a $929 tax cut up from $125. Someone earning $160,000 will see their benefit reduced from $4,675 to $3,729.
Parties ready for conflict
Albanese will claim the cuts are not inflationary based on advice from Treasury and the Reserve Bank of Australia (RBA), but he will face opposition from the Coalition and the Greens.
“I have consulted the Reserve Bank governor [Michele Bullock] and the Treasury Secretary has separately consulted the Reserve Bank governor, and she has indicated to us that she does not expect what we’re proposing today to alter the Reserve Bank’s forecasts or expectations for inflation,” Treasurer Jim Chalmers said.
Deputy leader Sussan Ley said the coalition would repeal the changes if elected at the next election.
This morning she told ABC’s RN Breakfast that she wanted to see the entire package of cuts.
“This is an entirely new set of changes. The proposal is not stage three 2.0, it’s entirely different. We don’t have the details. We will assess them when they are released, but we do know Labor lied to win the election.
She said that tax brackets shouldn’t be changed based on cyclical events.
“Rates are cyclical, wars are cyclical, tax brackets are permanent for a decade or more.
“We have to look at the details. We have to assess them when they’re released.”
The Greens will go into negotiation mode.
Acting Greens leader Mehreen Faruqi said, “If Labor would stop dressing up a stinker of a policy and actually scrap tax cuts for the rich, then we could invest in supporting people who are really struggling at this point in time.”
The Greens and independent senator David Pocock want to see stage 3 tax cuts scrapped altogether.
Independent Curtin MP Kate Chaney called out the changes as a broken promise.
“I think it is a real problem when politicians break promises. Really, if this was the intention of the government before the election they should have had the courage to say that.”