Tax Cut Plan Likely To Be Changed, Announced Thursday

PM Albanese is taking revised stage 3 tax cuts to the party room today and is likely to announce the plan and “cost-of-living” assistance tomorrow at 1230 AEDT at the National Press Club. During the 2022 election campaign, the Labor Party promised to implement the tax cuts of the previous government unchanged. After pressure from within the party and the union movement, that now appears to have changed ahead of a March by-election, May budget and next year’s election.

• The original proposal was meant to reduce the government’s reliance on income tax and was designed to flatten the income tax structure by having a 30% rate for those earning between $40k and $200k. The rates would drop from 32.5% and 37%. The top 45% bracket threshold would be increased $20k to $200k. These measures would already be in the RBA’s projections as they have been planned for some time.
• The Australian is reporting that the 37% rate for those earning more than $135k will be retained in the PM’s revised plan. The top 45% band will now start at $190k down from $200k. With the money saved being put into tax relief for those earning less than $135k, including a possible increase in the tax-free threshold. The PM has said that “everyone will be getting a tax cut” and the SMH has reported that he will say that the reform had to be altered due to global events since he was elected. Changes will require new legislation.
• Former Treasurer Costello has said that changing stage 3 will “unbalance the whole package”, according to The Australian. He noted that there has been significant bracket creep over the last 15 years. Business groups have said that the plan should be implemented unchanged on July 1 and they also criticised the states’ payroll tax.