Labor will only support first stage of Turnbull government’s $114 billion tax cut plans

LABOR will only support the first stage of the Turnbull government’s $114 billion personal tax cut plan, setting up a Super Saturday by-election battle over tax policy.

LABOR will only support the first stage of the Turnbull government’s $114 billion personal tax cut plan, setting up a Super Saturday by-election battle over tax policy.

If the government, as planned, refuses to split the income tax bill when it is debated in the Senate, Labor will vote down the entire package which includes tax relief for low and middle income earners.

Labor supports that part of the plan, but is opposed to longer-term changes to the tax brackets, which will give all workers earning between $41,000 and $200,000 the same marginal tax rate of 32.5 per cent.

Labor’s Treasury spokesman Chris Bowen is opposed to longer-term changes to the tax brackets.

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Labor had considered supporting the entire tax plan with the understanding it would make its preferred changes to the later stages of the package – which aren’t scheduled to start until 2022 at the earliest – if it won government at the next election.

Instead, it will fight five by-elections next month against the Coalition having voted against the tax cuts, with Mr Morrison yesterday promising to turn the polls into a referendum on tax.

The government needs to secure 39 votes to make its centrepiece economic reform law and is four votes short, with Labor, Centre Alliance and One Nation all wavering.

Treasurer Scott Morrison has repeatedly ruled out splitting the tax cuts into two parts — with Labor and crossbenchers publicly supporting low-and middle-income cuts but set against longer-term changes to tax brackets in 2024 — leaving the opposition to ponder its strategy

The Coalition will also bring on a vote over its business tax cuts, despite a stunning change of mind from Pauline Hanson late last month.

At stake could be several close by-elections, including in the marginal seats of Longman in Queensland and Braddon in Tasmania.

Labor’s Treasury spokesman Chris Bowen yesterday acknowledged the issue “is coming to a conclusion”, but refused to detail what he would recommend to the shadow cabinet last night.

“I will be making a recommendation to my colleagues about how to handle the personal income tax measures through the Parliament,” Mr Bowen said.

“When we’ve been through our normal processes, Bill (Shorten) and I will have more to say.

“If the government wants to deliver tax relief for Australians on July 1, 2018, put that to the Parliament … it will pass immediately.”

Treasurer Scott Morrison has ruled out splitting the tax cuts into two parts. Picture: Kym Smith

The government is threatening to turn the July 28 by-elections into a tax cut referendum, with Mr Morrison demanding Labor “decide whether they’re for lower taxes or higher taxes”.

“They’ll have to argue that case in these by-elections and at the next election,” the Treasurer told ABC Radio.

“The government won’t be blinking, we’ll be putting this forward because we believe it’s the right thing to do.”

The government wants to provide tax cuts for lower and middle income earners from next year. Picture: Supplied

The government wants to provide tax cuts of up to $530 for lower and middle-income earners from next year, making that a more permanent change by reforming the tax brackets from 2022.

Eventually all workers earning between $41,000 and $200,000 will pay a 32.5 per cent marginal tax rate.

Labor has proposed a larger tax cut for lower- and middle-income earners, but without the sweeping changes to the tax brackets due under the government’s plan by the end of 2024.