‘Pretty dodgy’: Personal income cut plan up for debate in Senate

A PLAN for personal income and business tax cuts was debated for the first time in Parliament today with the Federal Government declaring it was an all or nothing package.

THE Federal Government made clear today it was all or nothing on its package of income tax cuts as it dared Labor to vote against relief for low wage earners.

Labor is closer to a strategic decision on dealing with the Government’s three-stage package of personal tax reductions which will be put to Parliament over the next two weeks.

The immediate issue is the potential for tax relief for low income earners from July 1, part of the Government plan. Labor wants those cuts to go ahead with modifications to stage two affecting middle income earners from next year, and tougher rates for high income earners in stage three.

But Treasurer Scott Morrison told reporters today: “We are not splitting the bill, we are putting our entire personal tax plan to the Australian Parliament and there’s a choice for the Labor Party to make.”

Prime Minister Malcolm Turnbull supported his Treasurer.

“It means it’s one comprehensive reform to be voted on as a whole,” Mr Turnbull told reporters.

Finance Minister Mathias Cormann insisted he would not be giving in to Labor’s demands to split the seven-year, multi-phased personal income tax plan, which was debated in the upper house for the first time today.

“We have prioritised low and middle-income earners, but we have ensured that we address bracket creep across the board,” Senator Cormann said.

With the Government refusing to budge, Labor’s choice could be to support the package and promise to remove what it claims are unfair elements if elected to government, or to vote against the legislation.

Opposition leader Bill Shorten says the plan is ‘pretty dodgy as it stands’. AAP/Richard Wainwright

Mr Morrison said his upper house colleagues had been working diligently with the “unpredictable and confusing” Senate crossbench to garner support for the tax package.

“We are putting the whole plan forward because we believe all Australians who work hard deserve tax relief,” he told the Seven Network on Monday.

“We are for lower and more competitive taxes.”

Today, shadow treasurer Chris Bowen said: “I will be making a recommendation to my colleagues about how to handle personal income tax measures through the Parliament.

Urging a split in the legislation, he added: “If the Government wants to deliver tax relief for Australians on 1 July 2018 put that (separately) to the Parliament.”

But Opposition Leader Bill Shorten has described the Government’s plan as “pretty dodgy”, although he said he was willing to work with Mr Turnbull to vote for the cuts due this year.

Labor backs the new low and middle-income tax offset worth up to $530 for individuals that will start from July 1, as will an increase in the upper threshold for the 32.5 per cent marginal tax rate from $87,000 to $90,000.

But it says getting rid of the tax bracket two elections away is a step too far.

“If you want to give promises of tax cuts in more than two elections’ time, fight the next two elections and see where we are going then,” Mr Shorten says.

The government fell short of two senators just before Easter to get the plan passed and since then Pauline Hanson has reneged on an agreement with Senator Cormann to support it.

Meanwhile, Mr Morrison has launched a fresh attack against Labor’s proposed changes to share dividends, claiming the proposal will save much less than promised.

He argues the treasury numbers point to a $10 billion “black hole” in the Opposition’s plan to cut cash handouts for non-taxpaying shareholders.

“Treasury’s costing of Labor’s retiree tax proposal confirms concerns raised at the time Labor announced their proposal that they had over-estimated the revenue they expected to collect,” the treasurer told News Corp.

Senator Cormann was staying tight-lipped about how his negotiations over the Turnbull government’s tax package are going with the Senate crossbench.

“I don’t provide running commentary on my conversations with Senate colleagues,” he told reporters on Sunday.

The Australian Institute believes over the long term the government is over- compensating for bracket creep at all income levels.

“Our analysis shows the two highest income tax brackets have received the largest amounts of overcompensation in the name of bracket creep, when in fact they actually require the least,” the institute’s senior economist Matt Gradnoff says.

Next week the Senate is scheduled to recommence debate on the remainder of the government’s 10-year business tax plan which will reduce the corporate tax rate from 30 per cent to 25 per cent.

— With Daniel McCulloch and Colin Brinsden

Originally published as ‘Pretty dodgy’: Personal income cut plan up for debate in Senate