Stage 3 Tax Cut Revamp Passes Lower House

‘We want people to earn more and we want workers, every taxpayer, to keep more of what they earn,’ the treasurer said.
Stage 3 Tax Cut Revamp Passes Lower House
Australian Prime Minister Anthony Albanese (R) listens to the leader of the opposition Liberal Party Peter Dutton speak in the House of Representatives at Parliament House in Canberra on October 16, 2023. Australians on October 14 roundly rejected greater rights for Indigenous citizens, scuppering plans to amend the country's 122-year-old constitution after a divisive and racially tinged referendum campaign. (Photo by DAVID GRAY / AFP) (Photo by DAVID GRAY/AFP via Getty Images)

A revamp to stage three tax cuts for middle- and lower-income Australians has passed the House of Representatives with the support of the centre-right Coalition and the crossbench.

Under the amended proposal, 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 less tax cut than they otherwise would have.

Those earning less than $45,000 (US$29,000) previously wouldn’t be eligible to receive a tax cut but now will be able to under the change.

Australians whose incomes fall between $44,000 and $135,000 will receive a 30 percent tax rate, and people whose incomes fall between $135,000 and $190,000 would taxed at a 37 percent rate. The 37 percent bracket was removed in the original plan.

Meanwhile, Australians making over $190,000 will be taxed at 45 percent.

Previously, those on higher incomes were expected to benefit the stage three tax cuts, with those in lower to middle income brackets receiving benefits from the stage one and two tax cuts. The amended proposal would make those on middle incomes the biggest beneficiaries.

The legislation will move to the Senate for debate, and if it passes, will come into effect from July 1.

Labor Says Tax Cuts Will Benefit Workers

Prime Minister Anthony Albanese promised during the 2022 election that Labor would not touch the stage three tax cuts, but on Feb. 15 he said economic situations had changed.

“This is indeed a great day, it is a great day on so many levels, this is a day in which every Australian will get a tax cut, all 13.6 million of them,” he told Parliament.

“We want people to earn more and we want workers, every taxpayer, to keep more of what they earn.”

Mr. Albanese said the tax cuts represented cost of living relief.

“This package is a package that doesn’t leave people behind who earn under $45,000 a year,” Mr. Albanese said.

“Politicians will get less from this legislation, but average workers will get more.”

Treasurer Jim Chalmers agreed, saying the tax cuts would support workers.

“This bill is all about backing in the hard work of the truckies and the nurses and the teachers and the police officers and the steelworkers and the plumbers and the sprinkler fitters and the early educators,” he said.

“We reject the approach taken by [the opposition] who say that the only way to prosper as a country is for the Australian people to work longer and for less pay.”

Bracket Creeps Hurts Low And Middle-Income Learners More In The Long-Term

However, experts 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 declined once the stage three tax cuts became effective, but it would 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 is expected to raise $28 billion more than the former coalition government’s plan.

Menzies Research Centre Nick 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.

“It’s the way government grows without actually asking us what we want.”

The coalition had agreed to back the tax cuts, despite initially coming out against the proposals.

The opposition did put forward an amendment to the bill, but only to change the legislation’s official name to include the phrases “broken promise” and “entrenching bracket creep.”

Opposition MP Bert van Manen said the tax cuts did not go far enough to provide substantial relief.

“We’re seeing nothing in this bill that will deal with the cost of living, $15 a week is not going to scratch the surface when people are at a minimum of $150 a week worse off,” he said.

Nina Nguyen is a reporter based in Sydney. She covers Australian news with a focus on social, cultural, and identity issues. She is fluent in Vietnamese. Contact her at [email protected].
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