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.
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“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.
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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.”
As someone deeply versed in the intricacies of taxation policies and economic dynamics, let's delve into the key concepts discussed in the article about Anthony Albanese's plan to reshape Australia's tax relief structure.
1. Labor's Tax Relief Plan:
- Anthony Albanese, the Prime Minister, is proposing a substantial overhaul of tax relief for Australians, particularly those with average incomes.
- The plan aims to more than double tax relief for average-income earners and is designed to be funded by adjusting benefits for high-income individuals.
2. Justification for Policy Change:
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Albanese defends the policy shift by asserting that it aligns with changed economic circ*mstances. He contends that modifying the stage-three tax cuts is the right decision in the current scenario.
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In response to accusations of reneging on election commitments, the government plans to release Treasury advice supporting the policy change. This advice is expected to justify what Albanese calls a "change in our policy."
3. Components of the New Tax Relief Plan:
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The new plan involves reducing the lowest tax rate from 19% to 16%. This means that taxpayers earning less than $45,000 will receive a tax cut.
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The low-income threshold for the Medicare levy will also be adjusted, benefiting 1.2 million low-income earners who will either be exempt from paying the levy or will pay less in tax.
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Albanese claims that all 13.6 million taxpayers will receive a tax cut, with 84% of Australians being better off under the new plan. However, higher-income earners may receive less generous cuts compared to the initial stage-three tax cuts.
4. Impact on Different Income Groups:
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The new policy retains the 37% tax rate for incomes between $135,000 and $190,000. High-income earners making $200,000 or more will still receive a substantial tax cut, though less than initially proposed.
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Albanese emphasizes the positive impact on various groups, such as an average wage earner, a full-time worker earning $100,000, and a family with an average household income of about $130,000.
5. Economic Justification and Future Plans:
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Albanese cites Treasury advice describing the new plan as "broadly revenue neutral" and claims it won't contribute to inflationary pressures, supporting labor supply.
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The Prime Minister hints at additional measures to address the cost of living, indicating that the tax cuts are not the end of their actions in this regard.
6. Opposition Response:
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The opposition, represented by Deputy Liberal Leader Sussan Ley, vehemently opposes the changes, accusing Albanese of breaking promises made during the election.
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Ley pledges to fight against the changes in parliament and expresses the intention to repeal them if necessary after the election.
In conclusion, the proposed tax relief plan is a nuanced strategy aimed at balancing the economic realities of the moment, providing relief to low- and middle-income earners, and justifying a departure from initial election promises through Treasury advice. The article captures a political and economic discourse around taxation policies, reflecting the ongoing debates on how best to navigate the country's fiscal landscape.
