Stage 3 tax cuts damn Chalmers either way | Samantha Maiden

Working class families got a rude shock at tax time this year but there’s another major change looming in 2024, writes Samantha Maiden.

Lifting wages to help ease the cost of living was the lofty pledge of Anthony Albanese during the 2022 election.

He even briefly sparked a political storm by backing an increase in the minimum wage of at least 5.1 per cent, despite businesses claiming the higher costs would destroy jobs.

In theory, it’s a lovely idea we can all get behind – stopping your wages going backwards. In practice, it is proving harder to deliver.

But Australians hoping to see signs their wages will grow in real terms were delivered a deflating message this week.

Treasurer Jim Chalmers’ mid-year budget forecasts real wage growth to be just 0.25 per cent this financial year.

But fearing it would fuel inflation, there were few signs of new spending or cost-of-living support.

There was however more tax, as workers who do not pay their tax on time will no longer be able to deduct the late fee.

That will slug late payers around $500 million per year.

The Mid-Year Economic and Fiscal Outlook (MYEFO) suggests an extra $64.4 billion is headed into government coffers in the next four years.

Treasurer Jim Chalmers holds a press conference at Parliament House in Canberra. Picture: Martin Ollman

Despite the revenue forecasts, there were questions about the Stage 3 tax cuts designed to hand some of that back – to the wealthy.

“You say that you want this to be about responsible economic management. But do you think that it’s really responsible to continue with the Stage 3 tax cuts in our current economic climate?’’ a journalist asked.

In response, the Treasurer said that nothing had changed, for now.

“Our position on the Stage 3 tax cuts hasn’t changed for all of the reasons that we’ve been through in this room and elsewhere over recent months’’ he said.

“Our priorities, when it comes to tax reform, are elsewhere in this document. And in recent months as well we’ve also found, I think, a really effective way to provide cost-of-living relief to people on low and middle incomes.

“Whether it is increases to income support, changes related to out-of-pocket health costs, rent assistance, early childhood education, $23 billion of cost-of-living help across 10 different areas, which is targeted to making life a little bit easier to people who are doing it tough.”

There’s no doubt there’s some in the government who are itching to make changes to the promised tax cuts.

But changing the Stage 3 cuts now is a dangerous game, no matter how much some within the government would like to trim them.

Firstly, the time to oppose the tax cuts was before the last election, not after. Secondly, it’s a question of basic political survival.

Axing the tax cuts after promising not to touch them at the last election would be seen as a clear broken promise.

That would damage the Prime Minister’s political prospects at the next election with voters in all income brackets.

Prime Minister Anthony Albanese. Picture: Sam Ruttyn

But the dilemma for the Albanese Government is the slow burn of ordinary workers who are now missing out on the so-called low and middle income earner tax offset, initially worth $1080 and increased to $1500 in 2022.

Some people called it “The Lamington,” a reference to the acronym LAMIT offset.

But the lamingtons are all gone now, which is why Facebook groups are still full of confused mums and dads and workers wondering why their tax refund is tiny this year.

By contrast, an Australian earning $200,000 will get $9000 under the Stage 3 tax cuts.

But those earning up to $90,000 and previously eligible for the full $1500 offset are worse off.

The very expensive Stage 3 tax cuts begin next July.