Labor still open to phase-two tax cuts

Chris Bowen has left open the door to supporting phase two of the government’s personal tax cuts.

Chris Bowen, Shadow Treasurer during his address to the National Press Club in Canberra. Picture: Gary Ramage

Chris Bowen has left open the door to supporting phase two of the government’s personal tax cuts, which would lift the threshold for the 37 per cent rate from $90,000 to $120,000, after touting Labor’s targeted relief for low and middle-income earners.

The Opposition treasury spokesman yesterday demanded the government split its income tax bill, which ties tax relief for low and middle-income earners from July to a flattening of the tax rate at 32.5 per cent by 2024-25 for those on incomes of between $41,000 and $200,000.

The government is under pressure from Labor and the Senate crossbench to split the centrepiece of the budget — its $140 billion tax plan — into separate bills so phase one of the plan can sail through the Senate and deliver payments of up to $530 for those on incomes of up to $90,000 in 2019.

“Yes we support the government’s stage one. We said that we’d vote for it tomorrow — split the bill and no problems,” Mr Bowen told the National Press Club in Canberra.

While he said Labor had expressed “scepticism” about stage three — the flattening of the tax rate at 32.5 per cent — he signalled more consideration would be given to stage two. It is estimated the measure would spare an additional 210,000 earners being taxed at 37 per cent.

“Stage two is in multiple parts ... The government singularly refuses to release the year-on-year costings. They’ve got them. They know what they are. And they’re not that incompetent. Just release them,” he said.

Mr Bowen used his fifth post- budget address as Opposition treasury spokesman to trumpet Labor’s three key economic pledges: returning the budget to balance in the same year as promised by the government; the delivery of bigger surpluses over the forward estimates; and a bigger effort on debt payment in the medium term.

He also escalated Labor’s attack on Scott Morrison’s projected surplus of 0.1 per cent of gross domestic product by 2019-20, warning it could be “blown over in a light breeze” and questioning whether it could be undermined by over-­optimistic wage growth forecasts.

He left Labor with room to move on two other fronts, including the corporate tax rate for small companies and the duration of the deficit levy on high-income earners, which Labor has pledged to reinstate, effectively lifting the top marginal tax rate to 49 per cent.

Labor is under pressure to accept the already legislated tax cuts for companies with a turnover of up to $50 million, but has committed only to tax relief for companies with a turnover of up to $2m.

South Australian independent senator Tim Storer, a strong critic of the plan to reduce the rate to 25 per cent for all companies by 2026-27, yesterday urged Labor to accept the already legislated cuts. “That certainty is quite important for these business,” he said.

Mr Bowen said Labor would announce a “crystal clear” position on tax cuts for small businesses. Labor is understood to be considering limiting tax relief to companies with a turnover of up to $10m.

Mr Bowen also indicated the deficit levy would not be permanent, saying it would be reviewed when the budget had returned to a “sustainable surplus”.

The Treasurer said Labor could not deliver on its promises.

“We’ve heard it all before from Labor. ‘Oh yes, we promise we’ll be good this time’ — this is what they always say, just like they say they’ll turn back boats,” he said. “But they can’t be trusted to follow through.”