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Tax cuts confirmed to benefit 'middle Australia' hit by cost of living

The prime minister has revealed when he will 'take accountability' and detail the government's plan on Stage 3 tax cuts.

Anthony Albanese will present his plan to ease the cost of living for Australians hit hardest tomorrow as details of his intention to offer bigger tax cuts to those who earn about $150,000 a year are leaked.

An agreed-upon cut for high-income earners is looking to be whittled down, but that will reportedly only impact about 1 million taxpayers. This means he will still deliver a cut for “all Australians”, just not the promised full package nutted out in 2019 and passed by the Coalition, with his support.

The prime minister was peppered with questions when he fronted media in Canberra today, but stopped short of revealing the full details of the plan, which he said would be released when he addressed the Press Club tomorrow.

“I'll be taking a proposal on economic policy to the party room this afternoon,” Albanese said. “This proposal will be all about supporting middle Australia. We know that there are cost-of-living pressures on middle Australia, and we're determined to follow the Treasury advice to provide assistance to them.”

So, who are the winners and losers? The proposed cut for high-income earners will be reduced to be more in line with the benefits offered to those on a lower income.'

Anthony Albanese
Tax backflip? Anthony Albanese will reveal his plan to deliver more cost-of-living relief to middle Australia. (Source: AAP)

Currently, someone on $200,000 would get $9,075, while someone on $120,000 would get $1,875. A person earning below $45,000 would get nothing.

The median salary for a full-time worker is $83,000, while the average full-time worker gets about $95,000.

The Labor caucus is believed to have approved a plan to retain the 37 per cent tax rate, and pass on savings to those between the tax-free threshold of $18,200 and $45,000, according to the Guardian.

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Albanese will be able to argue he is delivering a package that benefits about 80 per cent of the population. He also rebuffed accusations made by the opposition that he was backing down on an election promise by pointing to the Liberal Party’s criticism of other cost-of-living relief measures like cheaper medicine, energy rebates and childcare assistance.

He urged his critics to hear out his plan before dismissing it.

Broken promise: Albanese threatens integrity with tax shift

Opposition spokesman for foreign affairs Simon Birmingham has called the tax rethink a "significant broken promise" and said it did not address bracket creep.

"What Anthony Albanese and Jim Chalmers will be doing is possibly giving some people a little bit more today, but many of those people will be pushed up into those higher tax brackets tomorrow and in the years ahead," he told ABC radio today.

"(The changes are) dressed up as a short term giveaway, but with long term consequences of the government relying on even more income tax."

Australia's largest business groups are urging Labor "to stick to its promise" of not amending them.

In a joint statement, the Business Council of Australia, the Australian Industry Group, the Australian Chamber of Commerce and Industry and the Minerals Council of Australia said "tinkering at the edges would mean a promise has been broken".

"Our tax base is eroding and with an unhealthy reliance on taxing incomes as well as a raft of inefficient taxes, especially at state and territory level, we are increasingly ill-equipped to meet our society's needs," the statement read.

"Fixing this mess requires not only political will and co-operation from across the federation - it will require public confidence that a program of reforms will be delivered as promised."

Meanwhile Greens senator Nick McKim said the reported changes likely would not go far enough.

"As it's currently cast, (it's not) the panacea that it's made out to be for low and middle income Australians, who will continue to struggle and I very much doubt that whatever tweaks Mr Albanese makes are going to make very much difference to them," he told ABC news on Wednesday.

Welfare advocacy groups have slammed the tax cuts as benefiting those at the top end of town while people on lower incomes struggle to manage a cost of living crisis.

Critics also claim the tax relief will be inflationary.

Opposition treasury spokesman Angus Taylor has described any move away from the full tax cuts as being the "mother of all broken promises".

He said after weeks of "weasel words and word games" the prime minister could not be trusted.

How have the tax cuts changed?

The stage three tax cuts meant to come in on July 1 would have abolished the 37 per cent bracket that applies to income between $120,000 and $180,000.

Instead, a 30 per cent rate would have applied 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 $9,0750-a-year tax cut to those earning over $200,000, but just $22.36 to those earning $45,000, and nothing for those below.

Ebony Bennet, deputy director of the left-wing think tank the Australia Institute, said those earning above $180,000 a year made up just 5 per cent of the population.

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.

With AAP.

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