Axing stage 3 tax cuts would cost $90-120K earners $2.6bn in 2024-25
Legislated tax cuts that could soon be junked — despite being backed by Labor four years ago— deliver more relief to middle-income earners than some on high salaries, analysis shows.
NSW
Don't miss out on the headlines from NSW. Followed categories will be added to My News.
Promised tax cuts that Anthony Albanese voted for in opposition but are now under threat would deliver more in total savings to workers earning $90,000 to $120,000 than to those on $150,000 to $180,000.
Parliamentary Budget Office (PBO) analysis shows that lower-income group is set to get $2.6 billion in combined relief in 2024-25, when the reductions are legislated to begin, while the higher earners would receive $2.5bn.
Those on $120,000 to $150,000 would also get more in savings than the higher earners, with their total tax burden falling by $2.7bn.
On top of this, the PBO’s research — done at the request of Greens leader Adam Bandt — shows that over nine years, $126bn in savings would go to workers earning less than $180,000, while $118bn would flow to those on more than that.
The cuts are the third and final stage of reforms that began in 2018 under the former Coalition government.
If stage three goes ahead, it will demolish bracket creep by creating a 30 per cent tax rate for anyone earning $45,000 right up to $200,000.
The number of workers in the top tax bracket will be about 700,000 higher by 2024-25 than it was in 2014-15, according to Treasury research.
Bracket creep will also have pushed a further 2.2m into the second-highest marginal tax rate over that 10-year period, the same analysis found.
While Labor voted for the stage-three cuts when in opposition, MPs in its left faction are now reportedly advocating for the changes to be junked.
High-profile backers of the Albanese government are also making the case for the reforms to be scrapped.
ACTU leader Sally McManus this week described the changes as “grossly unfair”.
“The Labor Party supported stage-three tax cuts in 2018 when the world was a very different place,” Ms McManus said.
Circumstances had changed and the government had to adapt, she added.
Deputy Opposition leader Sussan Ley said it was the worst possible time for Labor to equivocate on legislated tax relief.
But Treasurer Jim Chalmers has on Thursday said “When it comes to the stage three tax cuts our position hasn’t changed.”
The changes would lift the point at which the top tax bracket begins to $200,000 from $180,000, remove the 37 per cent band – which currently applies to incomes from $120,001 to $180,000 – as well as lower the 32.5 per cent tax rate to 30 per cent for income between $45,000 and $200,000.
The main reason the total savings are greater for workers earning $90,000 to $120,000 than for those on $150,000 to $180,000 is that there are more people in that lower income band.
Official figures show more than 1.4m people are in that lower band; there are about 360,000 in the higher band.
More Coverage
Read related topics:Anthony Albanese
Join the conversation
Cancer that killed dad won’t get me: Miracle drug gives Ryan hope
Ryan Harding has no memories of his father but he has lived with the same rare disease that took his life. Now, thanks to a newly PBS-listed miracle drug, he finally has hope—for himself and his future children.
Read more
‘Profits before patients’: Hospital slammed for hiring out maternity ward
The controversial Northern Beaches Hospital is putting “profits before patients” by hiring out one of its two maternity wards to film and TV crews rather than accommodate birthing mothers, irate staff claim.
Read more