Australians earning an average wage will have their tax cut nearly doubled and more voters will improve their take home earnings under a controversial government proposal.
The fiery back and forth over the stage three tax cuts is well and truly underway as the Labor Party commits to pushing through new tax reforms. Treasurer Jim Chalmers claims the government has formulated a “superior” policy that addresses a lack of support for low- and middle-income Australians in a cost-of-living crisis, while the opposition maintains its fierce objection to the backflip, described as the “mother of all broken promises”.
The stage three tax cuts as they stand would not give the $800 boost to middle Australia that Albanese’s plan promises, but it does promise a bigger tax break to higher-income earners who missed out in stage 1 and 2 of the plan. Changes to the Medicare levy that would give an extra $137 in relief for low-income earners has also been rolled into the government’s proposition.
Basically, on top of the Medicare levy sweetener, there are 3 big changes to the tax bracket system under Albanese’s plan. The easiest way to work out what you will get is by checking out this table.
Let's get into the changes.
Under the changes, due to take effect on July 1, a person earning an average wage of $73,000 will get a tax cut of more than $1,500 a year. Those earning $50,000 will pocket an extra $929 a year, while people on $100,000 will receive $2,100. Households on an average income of $130,000 will receive $2,600.
At the upper end, the stage three tax cuts for those earning $200,000 will be slashed from $9,075 to $4,500.
When the stage three cuts were introduced by the Coalition government in 2018, the Australian economy was expected to be supported by strong global conditions. Inflation and interest rates were expected to remain low. And no one was planning for COVID, which didn’t hit until more than a year later.
"Unanticipated global events meant these projects have not come to pass," Albanese told the Press Club, quoting Treasury advice.
The lowest rate on income tax will be reduced from 19 to 16 cents in the dollar, meaning workers will pay less on the first $45,000 they earn.
The second tax rate will be reduced from 32.5 to 30 per cent for people earning up to $135,000.
Labor will retain the 37 per cent rate for people earning over $135,000 and the top tax rate of 45 per cent will kick in at $190,000 rather than $180,000.
The changes are yet to pass parliament and will need the support of the Greens and crossbenchers.