Treasurer warns bracket creep will increase tax burden by $52b in four years

TREASURER Scott Morrison warns more Australians are being pushed into higher tax brackets and will be forking out $52 billion more in tax within four years unless action is taken.

• Budget 2018: What we know so far

TREASURER Scott Morrison warns more Australians are being pushed into higher tax brackets and will be forking out $52 billion more in tax within four years unless action is taken.

Drawing battlelines for an election around tax, Mr Morrison promised tax cuts were coming for middle and lower-income earners, while the highest earners would not be slugged more.

But Treasury data also revealed 3.6 million households, or about 40 per cent, received more in federal government payments than they paid in income taxes.

They also showed a quarter of Australians, or 2.4 million people earning $87,000 or more, are paying two-thirds of the $186 billion in personal income tax collected by the government.

It comes as Labor followed the government in dropping a proposed Medicare levy, but it will proceed with its plan reinstate the 2 per cent Deficit Levy on the highest-paid Australians.

Mr Morrison came out with a simple message for voters as he delivered his pre-budget speech in Sydney yesterday.

“Under Labor, you will pay more,” he said. “It’s simple, that tax you pay is your money. You earned it.

“A tax cut is not a welfare payment. It is not a giveaway as Labor and the ‘high tax club’ seem to think.”

Mr Morrison flagged tax relief in this year’s Budget was needed to prevent bracket creep pushing more Australians into higher brackets.

“The Parliamentary Budget Office predicts bracket creep will see Australians paying an extra $52 billion in tax by 2021-22 if our tax thresholds remain the same,” he said.

Mr Morrison also confirmed he was scrapping the proposed Medicare levy increase.

Labor’s treasury spokesman Chris Bowen said Labor would also drop its proposed Medicare Levy on people earning more than $87,000.

“The Government won’t be proceeding with the Medicare levy increase, therefore the Labor Party will not be proceeding with that increase,” he said.

“The fact they’re not proceeding with that is good. They don’t get a tick with it. They shouldn’t have come up with the silly idea in the first place.”

Mr Bowen said it was not the right time to drop the 2 per cent Deficit Levy on Australians earning $180,000 a year of more, despite it being introduced three years ago as a temporary measure.

Originally published as Treasurer warns bracket creep will increase tax burden by $52b in four years