Budget 2020: Pressure on Labor to back tax cuts

Finance Minister Mathias Cormann has urged Labor not to ‘stand in the way’ of any fast-tracked personal income tax cuts.

Business Council of Australia chief executive Jennifer Westacott. Picture: AAP

Finance Minister Mathias Cormann has urged Labor not to “stand in the way” of any fast-tracked personal income tax cuts, with the nation’s peak business group arguing the ­acceleration of tax relief could “put around $10bn to $15bn in people’s pockets”.

Labor has held off committing to any decision to bring ­forward tax relief before it can examine the package in full, but the opposition runs the risk of again being forced into passing a package with which it has major objections.

Business Council of Australia chief executive Jennifer Westacott told The Australian the government’s tax cuts represented “real dollars for Australians”, while Deloitte Access Economics director Chris Richardson said “the more economic support the better”.

Speaking on Monday, one day after the budget papers were printed, Senator Cormann gave a strong indication that tax cuts could be brought forward to help pump-prime the economy through the pandemic-induced economic crisis.

“We have a track record of always looking for opportunities to lower the tax burden on hardworking families. Personal income tax cuts put more money into workers’ pockets. They boost take home pay for hardworking Australians. So it’s always something that we are committed to pursue where that makes sense,” Senator Cormann said.

Tuesday’s budget, Senator Cormann’s last before he leaves parliament at the end of the year, is expected to announce stage two of the government’s income tax cut plan will be brought forward to either this or the next financial year.

But opposition Treasury spokesman Jim Chalmers refused to say whether Labor would seek to block any new legislation bringing forward stage two and possibly stage three of the government’s already legislated tax package. They are currently scheduled to commence in July 2022 and July 2024 respectively.

Stage two of the plan would lift the top threshold of the 19 per cent tax bracket from $37,000 to $45,000 and is supported by Labor, while stage three would abolish the 37 per cent tax bracket entirely and institute a flat rate of 30 per cent for all workers earning between $45,000 and $200,000.

Mr Chalmers reaffirmed his party’s concerns with stage three of the tax-cut package, which passed the parliament in July last year. If the acceleration of both stages of the government’s plan is included in a single omnibus bill, Labor could again be forced to support the package despite voicing concerns for several months.

“We’ve made our views on tax cuts well known for some time now,” he said. “For some months we’ve said that we’ve got an open mind to tax cuts for workers on low and middle ­incomes.

“We have raised concerns with stage three of the income tax cuts. Stage three is the least responsible, least affordable, least fair, and least likely to be effective because higher income earners aren’t as likely to spend in the economy as workers of more modest means.

“We’ve made that clear for some time. It’s up to the government how they present that legislation to the parliament. We haven’t seen how they intend to do that. We’ll come to a position after we see that.”

Ms Westacott told The Australian “the two tranches (of tax cuts) would bring forward and put around $10bn to $15bn in people’s pockets”.

“The ATO reported that within a fortnight of the last ­financial year ending, it had ­already paid more than $1bn in tax refunds — as more and more Australians lodge their tax returns early to access the tax offset that has already been implemented,” she said.

Mr Richardson said he supported bringing forward the tax cuts. “I’m happy to see it brought forward,” he said. “But I would also like to see other measures implemented too.

“It’s only stimulus when it’s spent. So things such as new infrastructure spending or giving money to the unemployed are good economic measures too.”