Dirty little secret in Labor’s cost of living budget

There’s a dirty little secret buried in the Prime Minister Anthony Albanese’s media blitz over cost of living relief in the budget.

It’s the dirty little secret buried in the Prime Minister Anthony Albanese’s media blitz over cost of living relief in the budget.

While the budget plans to dish out $14 billion in cost of living relief for families, the rich will still secure much more in tax cuts.

Here’s how. The centrepiece of the Albanese Government’s second budget will be $14.6 billion over four years for cost-of-living relief that will ease pressure on Australians.

That includes energy bill relief of up to $500 for pensioners and low income families and many other measures aimed at the disadvantaged and aged pensioners.

But how does that compare with the Stage 3 tax cuts that are set to come into force in 2024-25?

The Grattan report noted that the stage 3 income tax cuts will cost the budget about $20 billion a year from mid-2024. That’s every year, not over four years.

In other words, the wealthy will secure more cost of living relief through tax cuts next year alone, than all of the cost of living relief in this budget to be rolled out over four years.

But wait, there’s more.

Those Stage 3 tax cuts will be costing an estimated $31 billion by 2030. That means the wealthy will be securing twice the value of the budget’s cost of living handouts in one year.

RELATED: 10 million Aussies face ‘substantial’ tax hike

Treasurer Jim Chalmers and Prime Minister Anthony Albanese.

Asked about news.com.au’s report this morning Dr Chalmers said the vulnerable were getting relief first.

“You talk about helping the vulnerable, your cost of living package will cost $14 billion over four years. Stage 3 tax cuts that come in next year will cost upwards of $20 a billion a year. How do you reconcile that?,’’ he was asked.

“We’ll be helping the vulnerable this year, in this budget,’’ Dr Chalmers said.

“The tax cuts you raise, they don’t come in for more than a year now. They haven’t been a focus of our discussions for this budget. But we can help the most vulnerable people in our community and in our country this year.”

What are the stage 3 tax cuts?

The Stage 3 tax cuts abolish the 37 per cent marginal tax bracket completely and lowers the 32.5 per cent marginal tax rate to 30 per cent.

The changes will also raise the threshold for the 45% marginal tax rate, meaning everyone earning between $45,000 and $200,000 will pay the same 30% marginal tax rate.

What happens if i am a single mum on welfare?

Single parents on welfare are billed as among the biggest winners in Tuesday’s budget, one which will confirm sole parents will be able to receive the single parenting payment until their youngest child turns 14 – up from the current age of eight.

That will deliver a $4,576 a year windfall to eligible families.

The decision overturns one of Julia Gillard’s most controversial policies by allowing single parents to stay at home for four more years without being moved to JobSeeker.

Eligible single parents currently on JobSeeker as a result of the changes are also winners under the changes and will secure an increase to payments of $176.90 per fortnight.

These parents get a current base rate of $922.10 per fortnight (95 per cent of the Age Pension), until their youngest child turns 14.

That works out to be around $23,972 a year or $461 a week.

Sounds like a winner? Perhaps, until you meet the worker earning $200,000.

What happens if a worker is earning $200,000?

Compare the single mum scenario to a worker earning $200,000 a year.

Under the Stage 3 tax cuts they will receive a whopping $9,075 tax cut from 2024-25.

That means they will secure a tax cut worth a stunning $175 a week.

That’s the same boost that a single parent on welfare will get a fortnight if they have teenage children.

The difference is the worker on $200,000 has an income that’s around ten times that of a single mum.

What happens if i have an income of $120,000? or $80,000?

A single taxpayer earning $120,000 is paying around $24,375 a year in tax.

Under the Stage 3 tax cuts this worker will secure a tax cut worth only $1,875.

But it could be worse. If you’re earning $80,000 a year your tax cut is worth only $875.

If you earn $50,000 your tax cut is worth just $125. That’s for the whole year.

Treasurer Jim Chalmers will deliver his cost of living budget on Tuesday night. Picture: NCA NewsWire / Martin Ollman

Treasurer sticking with stage 3

Despite widespread speculation that the Albanese Government might reconsider the tax cuts the Treasurer is holding firm.

“Our position on stage 3 tax cuts hasn’t changed and it’s important to remember that they don’t come in for more than a year now,’’ the Treasurer said this month.

“And so, making that kind of decision on those stage 3 tax cuts wouldn’t have any impact on the inflationary environment that we are dealing with right now. Our focus in this Budget is to work through all of the pressures in our economy in a methodical and responsible way. That means a decent cost-of-living package focused on the most vulnerable, delivered in the most responsible way.”

Originally published as Dirty little secret in Labor’s cost of living budget