Australians must decide what tax cuts they support

AUSTRALIANS will get a cash boost after the government’s tax cuts passed the Senate. This is what it means for you.

THE Turnbull Government’s $144 billion income tax cuts will go ahead after the Senate today gave its approval of the package.

The government won the vote 37-34 with support from the entire crossbench except independent Tim Storer, despite objections from Labor and the Greens.

The package was sent to the House of Representatives where the government has the numbers to make it law, starting from July 1.

It means Australians earning more than $87,000 will see more in their pay packets from July 1, while low and middle income earners will get lump sum payments of up to $530 when they lodge their tax return next year.

But further tax cuts earmarked for the future, could be reversed after Labor said it would repeal most of the tax package if it wins the next election.

This means Australians will have to chose between the tax relief the coalition is offering, and the measures Labor wants to introduce.

There is wide support for cutting taxes on people earning up to $90,000 a year, but Labor opposed the package’s third stage, which benefits people earning up to $200,000 from 2024.

Treasurer Scott Morrison has said under the government’s plan high income earners will still pay more tax with six per cent of the highest income earners paying 30 per cent of the tax revenue.

Under the government’s plan, in 2024-25, a person earning $200,000 would pay around 13 times more tax than a person earning $41,000.

By 2020-21 average full-time wage earners would remain in the 32.5 per cent tax bracket through to 2022-23, before being locked into that rate from 2024-25.

Ahead of the vote One Nation leader Pauline Hanson conceded it was a gamble to support the entire package, having previously argued the third and final stage was unaffordable, but said she was now more optimistic.

“Yes we are supporting the personal tax cuts … we are pleased to do so,” Senator Hanson told the ABC on Thursday.

Meanwhile, Senator Storer issued a scathing attack on the Centre Alliance party, formerly the Nick Xenophon Team, of which he was once a member, for voting with the government.

“Today, Centre Alliance turned its back on the principles central to Nick Xenophon and the party he started,” Senator Storer said.

Here’s what to expect.

COALITION’S PACKAGE

The income tax cuts will be delivered in three stages over seven years. The first stage involves giving low and middle income earners a tax offset of up to $530, which they will be able to claim when they lodge their 2018/19 tax return next year.

People earning up to $37,000 a year would get a maximum offset of $200, while people earning between $37,000 and $90,000 would get a maximum offset of $530.

Labor supports the offset as well as part of step two of the package, which also starts on July 1 and involves increasing the 32.5 per cent tax bracket from $87,000 to $90,000, saving a person earning about $90,000 about $135 in tax.

But Labor doesn’t support further tax cuts included in step two to extend the 32.5 per cent bracket to include those earning up to $120,000 from July 1, 2022.

It also doesn’t support step three of the package, which removes the 37 per cent tax bracket so that those earning up to $200,000 only pay 32.5 per cent tax from 2024.

Labor has said it would repeal all the changes except for the tax offset.

WHAT LABOR WILL DO

Shadow treasurer Chris Bowen said both stages two and three of the government’s tax package would be repealed if Labor won the next election.

But Labor intends to replace the tax cuts with its own package, which it says will leave those earning less than $125,000 better off than the coalition’s plan does.

The party will deliver up to $928 in tax relief through refunds paid when people do their tax returns instead of through tax cuts.

It will also keep the Budget Repair Levy for higher income earners until the Budget is “back in sustainable surplus”, which it expects to achieve in 2022/23.

Mr Bowen said 70 per cent of Australian workers were “better off under Labor’s plan”.

The vote of One Nation leader Senator Pauline Hanson and her colleague will be crucial in getting the coalition’s income tax package passed. Picture: Mick Tsikas/AAP

TAX CUTS MAY HURT SERVICES

The Australian Council of Social Service was critical of the tax cuts and said people would miss out because the budget won’t be able to fund necessary services.

“The tax cut package is gambling the future of our medical services, aged care services, disability services, and social security payments most of us rely upon at some stage in our lives,” chief executive Cassandra Goldie said on Thursday.

“Essential services will lose funding because tax cuts have to be paid for.”

Dr Goldie said no one could know what the economic situation would look like in 2024 when the biggest round of tax cuts go through.

“Are we fortune tellers? No, and none us know what will happen to the economy and the budget that far ahead,” she said.

“We got into trouble last time a full income tax package was passed in advance. “The GFC meant our budget was in the red for a very long time and our essential services suffered as a result.”

— With AAP

Do you think the Turnbull Government’s income tax cuts should have been passed? Comment below.