No tax cut coming for low income earners on July 1

LOW income earners won’t get July 1 personal tax cuts following the Opposition’s strategic decision to oppose the full Government package of reductions.

LOW income earners won’t get July 1 personal tax cuts following the Opposition’s strategic decision to oppose the full Government package of reductions.

The Labor decision also means duelling tax policies will dominate the five by-elections to be held on July 28 and the federal general election expected in the first half of next year.

The Labor Caucus today decided to demand legislation for the Government’s three-step income tax package be split so it could vote down the second and third stages benefiting higher income earners.

The stage is now set for a gruelling nine month debate on personal and corporate tax systems.

“I think the real question is is Mr Turnbull willing to take all his tax plans to the next election. Or will it be like so many kites this government flies - it goes up and then it goes down,” said Opposition Leader Bill Shorten.

“It is an irresponsible plan from an irresponsible government and no responsible opposition would vote for it.

“We say to the government that if you want to talk about promises in more than two election cycle’s time, take these radical proposals to the people of Australia and see what they think about them.

“What we also say to the Turnbull Government is that you should not hold hostage tax relief for tradies and teachers so that you can give the top end of town tax cuts in seven years a time.”

Mr Shorten confirmed Labor would vote for stage one of the Government plan but not the rest.

Shadow treasurer Chris Bowen said the stage one benefitting low and middle income earners was a refund which could be made at any time in the next financial year

Prime Minister Malcolm Turnbull and Treasurer Scott Morrison have firmly declared no sections will be hived off, saying it’s all the legislation or nothing.

The Greens want to block the entire package but would consider allowing the first stage through.

When the crossbench is counted the Government is still three or four votes short of countering Labor and Green rejection of the full proposal.

The package, complete or shrunk, would have to be passed this week or next, before Parliament’s long Winter break, if lower income earners were to get tax relief worth up to $530 a year.

The first stage of the Government plan would see eligibility for the Low and Middle Income Tax Offset — which effectively makes the first $20,000 in earnings tax free — available to those earning between $20,200 and $125,000.

The Government calculates this would save taxpayers up to $530 a year.

Stage two would see the top threshold of the 32.5 per cent tax bracket moved from $87,000 to $90,000. The threshold would then shift from $90,000 to $120,000 in 2022- 23.

The contentious third stage in 2024-25 would see the top threshold for the 32.5 per cent tax bracket increase to $200,000, eradicating the 37 per cent tax bracket entirely.

This could mean those on incomes from $41,000 to $200,000 would have same marginal tax rate of 32.5 per cent.

The higher marginal rate, for those earning more than $200,000, would be 45 per cent