28 February 2024

Tax cuts for all as Labor's bill passes Senate in late sitting

| Chris Johnson
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Australian Parliament House

The new stage 3 tax cuts passed the Senate in an evening session on Tuesday. Photo: File.

Labor’s stage 3 tax cuts have passed the parliament and will kick in from 1 July.

Late on Tuesday (27 February), the Senate voted for the Federal Government’s changes to legislation the former Coalition government had in place.

Although Opposition Leader Peter Dutton has labelled the move as a broken promise from Anthony Albanese, the Coalition voted with the government nonetheless to pass the tax cuts.

The legislation passed the House of Representatives on 15 February.

A delighted Prime Minister described its subsequent passing in the Senate as a “huge win for all 13.6 million Australian taxpayers” because every one of them will now get a tax cut. However, tax cuts for higher-income earners won’t be as great as they would have been under the Coalition’s legislated cuts.

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“It means 84 per cent of Australians will get a bigger tax cut than they would have under the Liberals’ plan,” the Prime Minister said.

“Under Labor, Australians are earning more and they will get to keep more of what they earn.”

“Peter Dutton wants people to work longer for less, and this is a great divide in Australian politics.

“Peter Dutton and the Liberals, of course, when this was announced, first they said they would oppose it. Then they said they would fight it. Then they said they would roll it back.

“Then Peter Dutton called for a federal election on this policy before they voted for it. These tax cuts are aimed squarely at middle Australia, understanding the cost of living pressure that low and middle-income Australians are under.”

Treasury advice to the government is that the changes won’t add to inflation or burden the budget.

The legislation cuts two rates and lifts two thresholds to provide more tax relief to more people and return bracket creep where it has the most impact.

From 1 July this year:

  • The 19 per cent tax rate reduces to 16 per cent (for incomes between $18,200 and $45,000).
  • The 32.5 per cent tax rate reduces to 30 per cent (for incomes between $45,000 and the new $135,000 threshold).
  • The threshold above which the 37 per cent tax rate applies increases from $120,000 to $135,000.
  • The threshold above which the 45 per cent tax rate applies increases from $180,000 to $190,000.

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“Every Australian taxpayer will receive a tax cut this year – not just some,” the PM said.

“Our tax cuts are good for middle Australia, good for women, good for helping with cost-of-living pressures, good for labour supply and good for the economy.

“Labor’s tax cuts are not the beginning of our actions on cost of living and they will not be the end.

“They fit together with everything we are doing to build a stronger economy across the board.”

Finance Minister and Minister for Women Katy Gallagher labelled the vote a great result for women.

She stressed that 100 per cent of women who pay tax will get a tax cut.

“We know that 90 per cent of them will get a bigger tax cut than they would under the former plan,” Senator Gallagher said.

“And we also know that it’s good for participation. So if you want to pick up an extra shift, work a few extra hours, you won’t get penalised because you will be able to keep more of what you earn.

“So from a participation point of view, the Treasury analysis shows that, but also from just getting some more money in your pocket when you’re putting those household budgets together.

“And we know many women across Australia are doing that.”

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GrumpyGrandpa3:51 pm 29 Feb 24

In my opinion, the orginal Stage 3 that ScoMo and Albo put their names to, was just plain wrong.
Those on lower income levels were struggling to feed their families and big tax cuts were to go to those with the highest discretionary income; there’s something not quite right there. In addition, with so much debt, can we afford to not collect the taxes required to retire it?

That said, Albo went to an election supporting Stage 3.
Albo having committed to Stage 3, should have honoured his commitment and found another way to assist lower income earners with cost of living.

No one like a politician who is loose with the truth, then tries to make himself out as a hero.

GrumpyGrandpa – “In my opinion, the orginal Stage 3 that ScoMo and Albo put their names to, was just plain wrong.”

Here’s the problem with that – inflation means that people are paying more and more tax every year. A large majority of this tax is coming from one small group. The lower and middle income people already had tax cuts which were larger as a proportion of tax paid than what upper income people were getting.

In addition to this, just the last couple of years of inflation have COMPLETELY offset the initially proposed tax cuts already. If they went ahead, people in that bracket would still be paying more tax than they were five years ago anyway. Tax revenues have exploded as the government is stripping more and more away from hard working Australians.

If you keep taking more and more and more, from this group every single year, they stop working anywhere near as much or just leave the country as it’s simply not worth it anymore. Who’s going to subsidise the low income people then?

Grumpy Grandpa, your various attempts to walk both sides of the street on this topic have been a wonderful joke which has become tiresome with nonsensical repetition.

Bob, Go talk to Gina. She fully supports the downtrodden rich, even against the vicious predations of her own children who might have obliged her to pay some CGT along the way, before dispensing the $billions.

Alternatively, support bracket indexation without whinging about progressive taxation. Most people in the top tax bracket, top percentiles of income, manage to stay quite wealthy after paying fair tax. Sorry if that is too hard for you, or you lack the experience.

Byline – Nice try to conflate hard working Australians with the richest family in the country and someone that was handed down a multi billion dollar mining company as if they were the same thing.

Of course I support bracket indexation. It doesn’t mean I won’t call out a dishonest screwjob by a liar that just increased the amount of tax I and many other people will need to pay, both now and massively going forward. Why wouldn’t I call it out?

Most people that are wealthy, managed to get in before the global post GFC money printing spree pushed the prices of everything through the roof. I find it hilarious that people make the assumption that those who are now making good money, always have been and have had plenty of time to become “rich” as you put it. Many of us have worked our butts off to get to where we are finally making good money with years of 60+ hour weeks only for the governments to start taking more and more of it and watching inflation push the price of everything through the roof.

You talk about paying “fair tax”. What is fair level of taxation in your mind? Was it what high income earners paid 5 years ago? 10 years ago? Because that was a HEAP less than we are paying today. There hasn’t been an indexation for inflation for in those tax brackets for 15 years, in which inflation has increased, what 40-50%?

In your mind, is “fair tax” just an ever increasing number taken out of our pockets every single year? How do you come to the conclusion of what is “fair” exactly?

Bob, I merely offered you someone who might care.

Ask yourself what you would consider “fair”? I could lay a modest bet your answer would be couched in terms of yourself and numbers and not the whole of society, inferrable from your repeated whinging about progressive taxation and fixation on numbers at a date. Support indexation over “rectification” by tax cuts against arbitrary baselines.

Amongst some other things, fairness in taxation is related to progressivism (ability to pay), being economically non-distortionary, efficiency of collection and administration, and being difficult to avoid.

Not a number.

Byline – So the answer is yes, you do believe what is “fair” is an ever increasing number, that you somehow think is the duty of hard working members of society to pay to subsidise everyone else. Go have a look at the top tax brackets in other advanced economies like USA/Germany/Japan/South Korea/Canada etc and you will see that the top tax bracket kicks in WAY later, in some it’s more than three times higher. Why is it that it seems this heavy a level of taxation is only considered “fair” here?

The “ability to pay” as you put it, says nothing about it being remotely fair given yes, the government could decide to pick an arbitrary number and just tax people 90% on anything earned above it and yes, they may be able to pay it, but is that what you’d call fair?

I am assuming that people like you also wonder why those in that group do everything in their power to minimise the ever increasing amount of tax that is being yanked from their pockets by the government? A large number of people are getting to the point where they decide to massively cut down on work due to the fact that there is just no point busting their butts anymore when they lose the majority of their money to taxation anyway.

Bob, I paid, and I seem to be fine. What is your problem?

Or is your “like you” simply another example of crass ignorance and prejudice driving your comments?

I think we do place too much weight on income taxation here, so I am pleased to see you favour rectification by moving towards countries you cite, most of which have a higher tax to GDP ratio than Australia. That is, you will pay more in total. For example we could tax capital gains, and imputed rents on land and other resources effectively.

Please note that I did not pick a number as “fair” but observed you tend to do that in lieu of thought, and so you continue.

Your comment about people on high incomes deciding to “massively cut down on work” has no supporting evidence in national accounts, tax records or any general research or experience of which I am aware. Stop whinging and learn something beyond conceits.

devils_advocate10:32 am 29 Feb 24

I have to say the unquestioning media reporting on everything this government does would be hilarious were it not so disgraceful.

Many of the “journalists” here would have promising careers at Pravda

You obvioulsy don’t watch Sky ‘right at night’, listen to Nine radio or read the News Corp press. No lack of government criticism in those media outlets.

“Every Australian taxpayer will receive a tax cut this year – not just some,” the PM said.

Except that’s a flat out lie. The stage 3 tax adjustments were legislated, the tax brackets WERE already set and locked in from July 1st. They INCREASED the tax on these people, not reduced it.

All Albo did was steal money from those that already pay a massively disproportionate amount of the income tax in this country to give it to those that already had two recent tax cuts and many of which aren’t even net tax payers to start with.

Due to the shortsighted vote grab and betrayal of the Australian voter, millions of additional middle income earners will be pushed into these higher tax brackets over the next few years costing them more money than if they hadn’t changed from the initial plan… but hey, most people don’t understand economics or aren’t paying attention anyway.

devils_advocate10:31 am 29 Feb 24

Ok sure but screw those people anyway, right? They’re just rich fatcats.

All they do is fund the transfer payments for low income earners to keep them in the lifestyle to which they’ve become accustomed.

Who needs ‘em?

What Albo siad is exactly right. Every Australian, including the top end of town, will receive a tax cut. The tax cut for the top end of town will not get as much BUT they will still get a tax cut.

So cry me a river that the top “struggling” 10% of PAYG income earners are worse off than low and middle income earners – who are the real victims of the current cost of living pressure.

“Due to the shortsighted vote grab and betrayal of the Australian voter, millions of additional middle income earners will be pushed into these higher tax brackets over the next few years … ”
As has been happening for decades and will continue to happen until tax brackets are indexed. While the legislation does not address bracket creep, it did not create it.

JustSaying – The adjustments were already in place, they were legislated and were already coming in on 1st July. This was the default state, his changes have raised the taxes on the people in this bracket.

You can play semantics all you like to justify his lies but the fact remains, this was a tax hike not a tax cut to those in that bracket.

The low and middle income earners were supposed to benefit from both stage 1 and stage 2, which they did. Now they get stage 1, stage 2 AND stage 3 and those that already pay a massive majority of the tax in this country get used for the government piggy bank… as usual.

Yes, you know what would have adjusted for bracket creep for middle and upper income earners for the foreseeable future? The original tax rates that these economic vandals decided to scrap to try and buy votes. It’s almost like there was a reason for them to be setup that way in the first place when they were implemented by people who aren’t just thinking of a short term vote buying bump.

“The adjustments were already in place, they were legislated and were already coming in on 1st July. This was the default state, his changes have raised the taxes on the people in this bracket.”
Semantics? Really, Bob? Did these people actually receive the legislated tax cut? No – it was proposed to deliver the cuts in July.
It’s a broken promise from a politician. Gee that’s never happened before!

“Now they get stage 1, stage 2 AND stage 3 and those that already pay a massive majority of the tax in this country get used for the government piggy bank”
Shock, horror! Those who can most afford it, ie those on the largest incomes, pay the most tax in our progressive income tax system . Wow – who would have thought? Thank heaven for tax minimisation schemes or these high income earners might actually pay tax on their actual rather than manufactured income.

“you know what would have adjusted for bracket creep for middle and upper income earners for the foreseeable future?”
No, Bob the answer is not piecemeal adjustment of tax brackets – though it might appease whingers like you in the short term. However, the practical solution is bracket indexation. However, governments of all flavours have refused to do it because of the short term windfall offered through bracket creep – until the clamour becomes too great and the brackets get manually adjusted as has happened for two of the current brackets.

Justsaying – The tax cuts were already set, by legislation, they were 100% going to be coming in as set if Albo hadn’t decided to lie to the Australian public dozens of times before and after the election, right up to a week before the backflip. Do you debate this? Now, given this was the guaranteed state of the tax system before he decided to play Robin Hood, what was the effect of his changes? They were a tax INCREASE on those in that tax bracket.

Do you really believe that a system that takes more and more, year on year from the most productive, hard working members of society is sustainable? I find it hilarious when people say things like “a high marginal tax rate is not a disincentive to work”. Anyone who says garbage like that has never had a six figure tax bill and yeah, you may say boo hoo but I have worked very hard for a very long time to get to where I am. I’m in my mid 40’s but soon I’m going part time because it’s just not worth working my butt off, only for the government to take most of it. I know a bunch of others who are in the same position. They’ll have to go find other suckers to act as their piggy banks.

Agreed, it’s all about milking as much money as possible from the taxpayer. Now, taking for a fact that no government will make a move like indexing tax, the least they can do is meaningfully alter the system to be at least a bit more fair for a while, which is what the original design did. Now, due to inflation, people will be back to paying even more tax after this change within a couple of years but are just too stupid to realise this. Then again, tax and spend is the mantra of Labour so it’s hardly surprising.

The stage 3 cuts that were originally enacted, never came into effect, Bob. Despite your moaning and bluster, the reality is your tax never went down, it was only proposed. So how can something that was never actually in place be an increase?Nevertheless, the level of that proposal is no longer on the table but you will still pay less tax from 1 July. If you don’t like it than show it at the ballot box but for now, get over it.

“Do you really believe that a system that takes more and more, year on year from the most productive, hard working members of society is sustainable?”
Firstly drop the self aggrandising “hard working members of society” garbage. You don’t think nurses, teachers, emergency service workers, etc., who would love to be earning enough to make it to the highest tax bracket, don’t work hard?
Secondly, yes I not only think the progressive tax system is sustainable, it has been for many decades. Sure there’s the whingers like you who ludicrously will forego 55 cents to save 45 cents, but the majority recognise that they are still in front.

“Anyone who says garbage like that has never had a six figure tax bill and yeah, you may say boo hoo but I have worked very hard for a very long time to get to where I am.”
I’ve been retired for many years now, but I spent a major part of my career in the highest marginal tax bracket and made it into the “six figure tax” club. You know what,Bill? I wasn’t destitute because of the “outrageous” level of tax I paid, but rather had the benefit of a very nice, comfortable lifestyle. Furthermore, there was enough left in my take home pay that I could build my super – so much so that I have a comfortable nest egg and will never need to call on government assistance. So absolutely my response to you is boo hoo.

As for “I’m going part time because it’s just not worth working my butt off, only for the government to take most of it”. Perhaps you should actually consider how fortunate you are to be in a position where you have the luxury of choosing to go to part time. Many of the people you deride, for getting yet another tax break at your expense, are working two and three jobs to try to make ends meet.

I don’t begrudge you your obviously comfortable position but I’m afraid you’ll have to look elsewhere for any compassion over the level of tax you pay – others can only dream of being in the position of which you complain.

@Justsaying – I’ll keep the response brief as I am sure this is a conversation that could go on all day.

The rates were already 100% set, guaranteed by legislation. The government had to literally pass new legislation through parliament to change them. These are FACTS, they are not up for debate.

There is a massive difference between a progressive taxation system and one of the most punitive levels of taxation in the developed world. As I said in a previous post, go have a look at the levels of taxation in other developed countries and you will see that these levels of taxation kick in MUCH higher, everywhere else, in some cases at triple the rate it does here.

Good for you, you got in and made a heap of money before prices of everything went through the roof, before they closed all the tax loopholes and massively increased the tax they remove from people’s pockets. Have a look at the level of taxation back in your day, even accounting for inflation and what it looks like now, it is massively different. Inflation is a thing and the local and national governments have been using bracket creep to slowly take more and more from people’s pockets for decades. I am happy for you that you were in the right place at the right time to cash in, truly.

It’s funny how “fortunate” you become working a couple of decades of 60 hour weeks and studying your butt off in your spare time… it’s just funny how that works.

It must be nice being able to sit there on your high horse knowing that people in subsequent generations will never be able to get into the same position that you managed to get into.

I’ll keep my response even shorter than yours, Bob.

You are not the only one who worked long hours while studying part time. You just seem to think you are deserving of special treatment because of it.

The government has nearly doubled the income tax take in the last decade, well in front of inflation, wealth impacts or productivity growth.

It’s hardly generous to make these minor tweaks, particularly in breaking a major election promise.

Far more is needed to reform our taxation system but its questionable whether any party has the guts to tackle the systemic problems that cruel overall economic performance.

devils_advocate10:06 pm 28 Feb 24

lol refer to the post below. Apparently inflation and bracket creep are irrelevant, as is declining real wages. Increasing numbers of Australians being pushed into increasingly punitive tax brackets to pay higher rates of taxes on dollars with reduced purchasing power doesn’t matter, because look! They handed us back a pittance by increasing the nominal dollar thresholds and reducing the percentage rates at those nominal thresholds. Who are you to complain that the total tax take has actually increased?

If you dare disagree with this narrative, it is YOU who doesn’t understand basic maths, reeeEEEEEE!

Source: see below.

Still with the grandstanding, I see.

The article is about the MOST RECENT LEGISLATION which has delivered tax cuts. Did I say they were huge tax cuts or made up for the senseless non-indexation of bracket creep over the years? Did I say that the cuts in any way offset the lack of real wages growth over the the years? Did I argue against wholesale tax reform?

You call the changes “a pittance” – which is probably a reflection of your personal wealth situation. Someone on $45k a year will take what ever relief they can get from 1 July.

Source: common sense.

As stated on many occasions, I agree with your desire for wholesale tax reform.

Alas I doubt that because of the partisan nature of current politicians and the short term re-election thinking, none will have the guts to tackle a long term project.

devils_advocate12:00 pm 28 Feb 24

Not tax cuts.

Taxes have increased massively across all income brackets due to bracket creep.

This does very little to claw that back.

What a load of clatrap.

While bracket creep will ultimately be the same ongoing issue (until thresholds are indexed), the current stage 3 tax cuts, which is exactly what they are, will deliver some tax relief to every PAYG tax payer, and will be even better for some 85% of the workforce, than the Coalition’s planned cuts. For some it is in the form of a lower marginal rate and others it’s in the form of lowering the bracket threshold. No matter how you slice it, the stage 3 legislation delivers a reduction not an increase in taxes.

Because it doesn’t deliver as much, as the Coalition’s plan, to the high end of town is hardly cause for concern amongst the majority of tax payers – i.e. low and middle income earners.

devils_advocate6:53 pm 28 Feb 24

Breaking news – economic literacy and understanding of theft by inflation, and taxes, is now “clatrap”

You heard it here first folks. Remember, nominal dollars is all that matters, forget about the actual purchasing power of those dollars! Lmao

OMG – despite your pathetic grandstanding, your lack of comprehension of basic maths is mind boggling.
From 1 July, as a result of the recent stage 3 legislation, every PAYG employee will pay less tax on the same income – as in their tax will go down which is by definition a tax cut.
Rather than hearing it first here, most folks heard it first in primary school maths – did you skip that year?

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