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.
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.
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.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.
