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Cost-of-living relief for millions: Will more Australians be ‘paying less tax’ under Albanese shift?

"Pretty much every single taxpayer in Australia will now get a tax cut."

Anthony Albanese said more cost-of-living relief for “low and middle income earners” could be announced as early as this week amid fresh speculation high-income Australians will lose their promised tax cut.

The prime minister continued to pledge his stage three tax cuts would go ahead as his ability to tackle the cost-of-living crisis was recently called into question. He hinted today the government would be discussing a way to “put extra dollars” in the pockets of those “doing it tough” in an emergency meeting of his party in Canberra this week.

2GB Radio has claimed Albanese will be putting forward revisions to his tax reform, which would increase the tax-free threshold from $18,200 to benefit low- and middle-income earners, and reduce tax cuts for higher-income earners by keeping the current top marginal tax bracket threshold at $180,000 - instead of shifting it to $200,000.

Australian Prime Minister Anthony Albanese holds a joint press conference with New Zealand Prime Minister Christopher Luxon at the Commonwealth Parliament Offices in Sydney, Australia, Wednesday, Dec. 20, 2023. The one day visit is Luxon's first official overseas visit as New Zealand Prime Minister.(AP Photo/Mark Baker)
Cost-of-living relief is at the top of Anthony Albanese's agenda this week, but will he back down on an election promise that delivers tax cuts to high income earners? (Source: AAP) (ASSOCIATED PRESS)

Do you have a story? Contact belinda.grantgeary@yahooinc.com

“Pretty much every single taxpayer in Australia will now get a tax cut. But lower-income earners will get more of a tax cut than was first promised and higher-income earners will get less than was first offered,” 2GB’s Chris O’Keefe said.

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A spokesperson for Treasurer Jim Chalmers told Yahoo Finance there were no plans to change the promised tax reforms, which were passed by the Morrison government in 2019 with Labor’s support.

“The government’s plans have not changed,” the spokesperson said.

Albanese has been fielding criticism that the tax cuts weren’t benefiting those most in need, however backing down on an election promise could divide his party and supporters. Opposition Leader Peter Dutton said last week Albanese would be risking his leadership by backflipping.

“Australians have seen this movie before and they don’t reward leaders who go to an election with an iron-clad guarantee and then knowingly break it,” he said.

“If the prime minister breaks that promise, I think his leadership is done."

What are the stage three tax cuts?

The stage three tax cuts will abolish the 37 per cent bracket that applies to income between $120,000 and $180,000.

It will also apply a 30 per cent rate to all earnings between $45,000 and $200,000.

The biggest benefit of the cuts would flow to Australians who earn the most and pay the most tax, providing a $9,000-a-year tax cut to those earning over $200,000, but just $22.36 to those earning $45,000.

The median Australian income is $67,000 a year while, for full-time workers, that sits around $83,000 a year, according to left-wing think tank the Australia Institute. Deputy director Ebony Bennet said those earning above $180,000 a year made up just 5 per cent of the population.

Under the speculated changes Albanese is reportedly putting to caucus this week, people with an annual income over $200,000 a year would get a $6,075 tax cut instead of $9,075. Someone on $90,000 would be looking at a cut of approximately $1,400 instead of the current proposal of $1,125.

The cuts were legislated by the previous Coalition government. At the time, Albanese argued against it in opposition but ultimately agreed.

The low and middle income tax offset (LMITO) was not renewed in the last budget and came to an end on June 30 last year.

The upcoming May budget is the final chance for the government to tinker with stage three before July 1.

Will I get any more cost-of-living relief?

Albanese has said cost-of-living relief will be debated at the special ALP caucus meeting on Wednesday.

“We will take whatever advice is given to us but we’ll always look for ways in which we can provide assistance to people, particularly people who are on low and middle incomes, the ones who are doing it particularly tough," he said.

The government said it had already provided significant relief through changes to Medicare and rebates for energy, medicine and child care.

Medicare changes: Tripling of the bulk-billing incentive will make it cheaper to see a GP, with “more than 11 million young and low-income Australians able to go to a doctor with no out-of-pocket expenses. Check out our explainer here.

Energy rebates: Further installments of the budget relief package mean eligible households can get up to $500 and small businesses up to $650 credited to their power bills each year - in quarterly payments. Your eligibility was reassessed on October 31 so you may be getting another or a new payment. Check out our explainer here.

“Whether it’s bulk-billing, energy rebates, cheaper medicines or cheaper child care, we’re doing everything we can to responsibly ease the cost of living for Australians," Chalmers said.

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