Stage 3 tax cuts reportedly won’t be brought forward

Hopes some Australians would benefit from an early change to tax cuts have been dashed as reports suggest a key plan has been dropped.

Hopes have been dashed that Stage 3 tax cuts – aimed at middle and higher income earners – could be brought forward.

Treasurer Josh Frydenberg has reportedly decided not to feature the measure in this year’s Budget due to be handed down on March 29.

The Stage 3 cuts are due to begin in 2024/25 and will see everyone earning between $45,000 to $200,000 paying 30 per cent in tax. Hopes were raised they would come into effect earlier after the government brought forward Stage 2 tax cuts due to the coronavirus pandemic.

But according to The Australian, Mr Frydenberg will focus instead on targeted assistance to ease cost-of-living pressures amid rising inflation that has seen prices for food, petrol and other goods skyrocket.

The government is set to slash the tax on a beer by 30 cents despite complaints it’s a tax cut for men. The proposal would translate to a 40 cent cut in the price of a pint, while a schooner would be 30 cents cheaper and a pot 20 cents.

Prime Minister Scott Morrison is also facing pressure to cut fuel excise as petrol prices soar above $2 a litre, although so far has not committed to do so.

The Stage 3 tax cuts, which are being supported by the Labor Party, have been controversial with some saying they benefit high income earners.

They would see the 37 per cent bracket discarded and Australians earning $180,000 would no longer have to pay the top 45 per cent rate of tax, as the threshold would be lifted to $200,000.

The Australia Institute senior economist Matt Grudnoff told news.com.au last year those earning a wage of less than $88,000 a year would be worse off once the temporary Low and Middle Income Tax Offset (LMITO) – worth up to $1080 for individuals or up to $2160 for couples – ended, as they won’t benefit as much from the Stage 3 cuts.

Treasurer Josh Frydenberg and Prime Minister Scott Morrison. Picture: Alex Treacy

Some of the biggest winners from Stage 3 will be those earning $200,000. They have not been receiving LMITO because they earn too much but once the Stage 3 tax cuts kick in, they will be better off by $9050 a year.

However, unlike the tax cuts, the LMITO is a temporary measure and is due to expire in June, although Prime Minister Scott Morrison has not ruled out extending it for at least another year.

Mr Grudnoff has said he believes the government should abandon the Stage 3 tax cuts completely.

“We were told at the time the tax cuts were announced (in 2018/19) that we could afford them because the economy would grow strongly,” he said.

The Covid-19 pandemic has since impacted Australia’s economy and Mr Grudnoff said there was even less reason for the cuts, which would go mainly to high income earners.

“They go mostly to the top 10 to 20 per cent of taxpayers and the bottom 20 per cent get nothing,” he told news.com.au.

“Most people on average or medium incomes will be worse off.”

During an appearance on Insiders last year, Mr Frydenberg struggled to explain the economic benefit to Australia of the Stage 3 tax cuts.

Originally published as Stage 3 tax cuts reportedly won’t be brought forward