26 January 2024

Tax cuts for all, but not as much for the big earners

| Chris Johnson
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Prime Minister Anthony Albanese announced changes to stage 3 tax cuts at the National Press Club today (25 January).

All Australian taxpayers will pay less tax from July this year due to changes the Federal Government has made to stage 3 tax cuts that were legislated almost five years ago.

But high-income earners will only get half of the tax relief that Scott Morrison promised and which Labor vowed to honour.

Declaring that changed economic circumstances warrant a reverse in policy and the breaking of an election promise, Anthony Albanese told the National Press Club on Thursday (25 January) that all Australians needed tax relief.

The changes to stage 3 will take the focus away from higher income earners to include tax cuts for all, in what the Prime Minister said was a shift towards middle Australia.

“I understand people are under financial pressure,” Mr Albanese said.

“Australians have been living through the economic aftershock of the pandemic, the first recession in three decades, and the ongoing, far-reaching consequences of Russia’s invasion of Ukraine.

“An unprecedented combination of global inflation and damaged supply chains has pushed up interest rates, putting pressure on family budgets.

“Everything we have done as a government has been about managing those competing forces … and so we have room in the budget to provide more support to Australians.”

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From 1 July, the 19 per cent tax rate will be reduced to 16 per cent for incomes between $18,200 and $45,000.

The 32.5 per cent tax rate will be reduced to 30 per cent for incomes between $45,000 and the new $135,000 threshold, which will increase from $120,000, meaning the 37 per cent tax rate applies from $135,000.

The threshold at which the 45 per cent tax rate applies will increase from $180,000 to $190,000.

The changes mean 2.9 million more taxpayers will receive a larger tax cut than they would have under the already legislated stage 3 plan and 84 per cent of taxpayers (11.5 million people) will receive a bigger tax cut compared to the old plan.

A person with an average income of $73,000 will get a tax cut of $1504, which is $804 more than they were going to get.

Those earning $40,000 will get a tax cut of $654. Under the stage 3 plan legislated half a decade ago, they would have received nothing extra.

Someone earning $100,000 will get a tax cut of $2179, which is $804 more than they would have received.

In fact, all taxpayers earning between $45,000 and $135,000 will get an extra $804.

Those earning $200,000 will still get a tax cut, but it has been reduced from $9,075 to $4,529.

“Today, I announce that from the 1st of July this year, our government will deliver a tax cut for every Australian taxpayer,” the PM said.

“All 13.6 million taxpayers, not just some. Everyone who works and pays tax will benefit.

“This is a plan for middle Australia that delivers for every Australian taxpayer, right up and down the income ladder.

“Helping with the cost of living, nourishing aspiration and boosting participation. Strengthening the connection between hard work and fair reward.

“Because we want people to earn more and we want them to keep more of what they earn.”

For a family with an average household income of around $130,000, with one partner earning $80,000 and the other $50,000, their combined tax cut will be just over $2600.

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The government also released advice from Treasury saying the changes will not adversely impact inflation.

“This option is broadly revenue neutral, will not add to inflationary pressures and will support labour supply,” the advice states.

The Reserve Bank of Australia has also advised that it didn’t expect there to be any implications for its inflation forecasts.

The Prime Minister had to bat away numerous questions about his change of mind and the implications to his own integrity.

He repeated that the overhaul was necessary in response to the changed economic circumstances facing Australians and would make the tax system fairer and more inclusive.

“I want to be known as the prime minister who had the ticker to do what’s right,” he said.

The changes need to be legislated, with bills to be introduced to parliament in the first weeks of sitting.

The Opposition has vowed to assess the proposals and fight at least some elements of it.

It is set to take the PM to task over his backflip, describing it as a “treachery against the Australian people”.

“Our position is that the stage 3 tax cuts should be implemented as designed and endorsed by the Australian people,” Deputy Opposition Leader Sussan Ley said.

“That was Anthony Albanese’s position.”

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Incidental Tourist1:51 pm 27 Jan 24

If they had not spent $450 million on failed referendum they could still proceed with the original stage 3 tax cut adding extra tax assistance to low income earners. They would not have broken key election promise yet leaving their own legacy in the tax cut. They could introduce some Indigenous advisory body instead which they can’t now in the light of the failed referendum. Extra tax assistance and new Indigenous council (without changing constitution) would be a true centrist position as opposed to leftist shift which cost us in so many ways.

Martin Keast10:41 am 27 Jan 24

Cutting government spending is now becoming an absolute necessity.

This is typical socialist redistribution by coercion and levelling of everybody towards, ultimately, a universal single income.
When will lefties like Albo learn that (a) when you do things like this, you disincentivise people to strive to do better and (b) it is fundamentally unjust to penalise people based on their income level. What is needed is a level playing field and for governments to stop trying to socially engineer through punitive taxation.

(a) Rubbish
(b) Rubbish

Why are you trying to socially engineer through punitive taxation of the majority?

So again , why doesn’t a person making 200k only pay 4 x the tax rate as someone making 50k

Well said Martin. Couldn’t agree more. The waste incumbent in government is beyond belief and there is a huge disincentive to better your earning prospects by higher tax percentages the more you earn. 30% of 200k is much greater than 30% of 80k. It’s s good start to cancelling this entitlement society that’s growing around us.

Worst PM?? Nicking off to Hawaii when around half the country is on fire, telling sexual assault victims and survivors they are lucky they are not met with bullets, constantly denying he said something even when it was part of an interview, the list is long….

Capital Retro1:52 pm 27 Jan 24

When was half the country on fire? I missed that.

Clearly making money and improving your prospects isn’t part of this clowns agenda. Worst and most useless PM in living memory. Hasn’t a clue about business or people’s desire to keep what they earn rather than throwing it at a body that just wastes it. The sooner this crowd go the better. I’m sick of it.

In the mid 2000s an employee being paid $180,000 tells their employer they just want pay increases based on inflation. In 2024 the salary has increased with just inflation to just under $260,000. However even though their salary has increased with inflation they are much worse off – due to bracket creep. In the 2000s none of their salary was taxed at the highest tax rate but now about 1/3rd is. We used to be mature enough to be able to adjust the tax thresholds every few years to stop this getting out of control but we have not done this for 17 years now and just decided to kick the problem further down the road again… till a time when it will be even bigger. No wonder Australia has the second highest reliance on personal income tax in the world. And this will probably get us to first. The top 5% of taxpayers pay 40% of personal tax and the bottom 40% pay under 5% and this will just make this worse.

Or better.

I agree there is over-reliance on personal income taxes as a proportion of all tax income.

It’s great to have a leader who can make the politically tough but fair decisions.

Bj_ACT. Great sense of humour bj.

Good! This restructure of the stage 3 cuts provides a much fairer share of the tax savings and most importantly, provides extra money to low income earners who have been struggling the most in recent years.

Why shouldn’t someone who pays say 60 K in tax get a bigger tax break welcome to welfare Australia

No-one who is paid less than them gets back more than them after this change. If you are paid more, you will have more money. What is your problem?

So a tax refund is welfare? Well those earning the most are still getting the most!!

Yeah but why does the high income earner pay a disproportion amount of tax compared to the lower tax payer the person on say 200k does pay 4 x the tax as someone on 50k

If you are not already aware of the answers to your question davo1, why are you discussing tax at all?

Oh im aware thats why its an unfair system

1. They still do get a bigger tax break.
2. An extra $1,000 will make a bigger difference to someone earning $50k than the $4k (difference between old and new cuts) will mean to someone on $200k. People earning less need it more.
3. Show me the mythical $200k earner who’ll do decline the chance to earn $250k because too much of the extra goes in tax.

Ummm … because they earn 4 times the salary … maths not your strong suit then?

1. This was to fix bracket creep. 7 years ago before we had record inflation caused by Labor lockdowns.
2. Didn’t everyone get 1500 per tax last year and 1500 this year. These were removed and replaced with a tax cut of 1504.
3. This will again screw over inflation. We’ll need another tax cut in a few years and everyone will demand a pay increase.

This is 3rd world politics and runaway inflation.

“This was to fix bracket creep.” I disagree … it doesn’t fix bracket creep, it temporarily addresses it. The only way to address bracket creep, as others have highlighted, is to index the thresholds.

“… 7 years ago before we had record inflation caused by Labor lockdowns”
Except in 2019/20/21, there were Coalition governments federally, in SA, NSW and Tas. Facts, gooterz, very important in the credibility of an argument!

HiddenDragon9:39 pm 25 Jan 24

In some respects, and regardless of the outcome of the Dunkley by-election and the next federal election, today may be a turning point in Australian politics to the extent that it marks the end of an era in which the bipartisan message to Australian voters has essentially been “you can have your cake and eat it, too”.

For the affluent progressives (including some prominent media types now suffering from very public head explosions) the days of voting in line with their dinner party chat, while still benefiting from tax and middle class welfare policies championed by the Liberals, appear to be numbered.

For the less affluent social conservatives, voting in line with Sky After Dark and talk radio will become more challenging when the Liberals get serious about finding savings to fund a restoration of some, if not quite all, of their flat tax project.

Interesting days ahead.

devils_advocate6:44 pm 25 Jan 24

Nobody got a tax cut.

These changes only gave back a small part of what was stolen by bracket creep.

The media buying into this idiocy by referring to them as “tax cuts” only makes it worse.

Over time the punitive levels of tax in this country will just make it worthwhile for more people to engage in increasingly desperate tax minimisation and ultimately avoidance measures.

Inflation was a world wide phenomena, not caused by labors (lol) lockdowns

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