The Albanese government’s reworked stage three tax cuts have passed the Senate, a move that will bolster the benefits for low to middle-income earners while reducing the tax break for the higher end of town.
Under the new law, Australians making under $146,000 (US$95,000) will receive a bigger tax cut than under the previous legislation by the former coalition government.
On the other hand, those making above this threshold will get a smaller tax cut than they otherwise would have.
The centre-right Coalition backed the new legislation even though Coalition Leader Peter Dutton had criticised Labor for breaking an election promise to not touch the stage three tax cut.
“We’re supporting this change not to support the prime minister’s lie but to support those families who need help now,” he told reporters on Feb. 27.
Mr. Dutton said the opposition would put forward another policy in the next election to cut taxes for Australians suffering from the cost-of-living crisis.
Coalition MPs and senators discussed the new tax regime during a party room meeting, with four or five people proposing different amendments and one arguing against endorsing Labor’s plans.
Former Prime Minister Scott Morrison, an architect of stage three tax cuts, defended his original proposal but supported the reworked package.
The coalition will refer the legislation to a Senate committee before it passes parliament.
As the bill was debated, Opposition Finance Spokeswoman Jane Hume told the Senate that Coalition’s support for a tax cut “should never be read as an endorsement of Labor’s breach of faith.”
Labor Defended New Tax Regime
Prime Minister Anthony Albanese said he wanted the revamped tax cut to be legislated by the Easter long weekend, before they come into effect in July.
Mr. Albanese argued that the decision to change the stage three tax cuts was “the right thing to do.”
“You can’t say that there are cost of living pressures out there on middle Australia and then not be prepared to do everything that can do to make a difference. We will make a difference,” he said.
Meanwhile, Treasurer Jim Chalmers argued that the change would not drive up inflation and that it would deliver more tax relief for more Australians.
“Tax relief rolls out over the course of the year, not in a single payment, so its effect is staggered,” Mr. Chalmers said.
“It begins to flow from the middle of the year when inflation is expected to moderate further.”
He added that the legislation was “good for workers” and “good for our economy.”
“This is not relief or reform, this is relief and reform, more relief for middle Australia and a better reform for our economy,” he told Parliament.
“It’s about recognising that aspiration in this country is not and should not be limited to people who are already doing pretty well. Middle Australia is aspirational Australia.”
Mr. Chalmers criticised the Coalition’s stance as “indefensible, unintelligible, incoherent, and unsustainable.”
“The opposition don’t like our changes because they would prefer wages to be lower and inflation to be higher and they want tax cuts to be skewed to the highest incomes,” he said.
However, Menzies Research Centre Executive Director Nick Cater said that with the rejigged arrangements, the tax take would increase by the end of the decade and hurt low and middle-income earners the most. The phenomenon is also called bracket creep, which occurs inflation pushes workers into higher income brackets.
According to the government’s analysis of the budget, average income tax rates will decline once the stage three tax cuts became effective, then start to increase by 2025. By 2030, the average personal income tax rate is projected to rise to a record high of 27 percent, even after the new change is implemented.
Mr. Albanese’s measures are expected to raise $28 billion more than the former coalition government’s plan.
Mr. Cater argued he was concerned about the “insidious growth of government” the revamped legislation would fuel.
“Bracket creep is an insidious way of the government getting more of your money,” Mr. Cater told Sky News on Feb. 15.
AAP contributed to this article.
