Budget 2020: Scene set for federal election battle on tax

Josh Frydenberg says the government remains committed to $130b in income tax cuts left out of Tuesday’s budget.

Treasurer Josh Frydenberg and Prime Minister Scott Morrison during Question Time this week. Picture: Getty

Josh Frydenberg says the government remains “fully committed” to $130 billion of income tax cuts that were left out of Tuesday’s budget, setting the scene for an election fight on tax with Labor.

The Treasurer said the government only brought forward stage two of its legislated income tax plan because it wanted “the biggest bang for our buck” in the stimulus-focused budget.

But he said the government remained supportive of stage three of the plan, which is due to commence in 2024.

Labor has criticised stage three of the package – which flattens the maximum tax rate to 30 per cent for all workers earning between $45,000 and $200,000 – but is yet to decide whether it will go to the election repealing the measures.

“We wanted the biggest bang for our buck and that was bringing forward the stage two tax cut,” Mr Frydenberg told ABC’s Insiders program.

“Those lower and middle-income earners, they will get the best and biggest boost from these initiatives.

“There is absolutely bang for buck (in stage three), but that is a big structural reform.

“This is a very important reform to create a stronger, fairer tax system.”

The second of the three-step personal income tax plan – brought forward in last week’s budget – increases the top threshold of the 19 per cent income tax bracket from $37,000 to $45,000, while the 32.5 per cent tax rate will kick in at $120,000, instead of $90,000.

Coming under pressure over the scheduled ending of JobKeeper in March, Mr Frydenberg said the Coalition saw government as the “catalyst for the economic recovery, not the solution”.

“The solution lies around every kitchen table in every Australian household. The solution lies in every factory floor, in every farm, in every shopfront,” Mr Frydenberg said.

“They are the people who have to take the decisions to employ more people. This is the philosophical divide between us and our political opponents. They see government as the solution. They will always spend more and tax more.”

But he admitted more businesses would fold during the pandemic.

Mr Frydenberg defended the budget’s support for women after coming under attack from Labor for overwhelmingly supporting industries that were male dominated.

“There are women across the trades,” Mr Frydenberg said.

“There are women who work on infrastructure projects, there are women who work in research and development.

“We have measures right across this budget that are designed to boost female workforce participation so we could get it back to where we started.

“Of the 1.5 million jobs that the Coalition government created, more than half, around 60 per cent went to women.”

Anthony Albanese leapt on Mr Frydenberg’s comments of stage three tax cuts and accused the government of not having a plan to grow the economy.

“The Treasurer this morning said the reason why he didn’t bring forward stage three of the tax cuts was because they wanted bang for their buck. The Treasurer has said they won’t get bang for their buck by bringing forward stage three of the tax cuts,” the Opposition Leader said.

“You have got to question the whole economic policy of this government. They don’t have a strategy to grow the economy.”

Mr Albanese said Labor opposed stage three tax cuts after the May election but is yet to commit to repealing the measures if he becomes prime minister.

“We will make decisions about a whole range of policies down the track,” Mr Albanese said.

“But the question is now for Josh Frydenberg: if he doesn’t think there is any bang for the buck for stage three of the tax cuts, why did he suggest it?”

Opposition Treasury spokesman Jim Chalmers on Sunday said improving female workforce participation was one of the “defining challenges in the economy” as he defended attacks from the Morrison government that Labor’s $6.2 billion childcare package favours the wealthy.

With Labor attempting to bolster its credentials as a party of aspiration rather than class warfare, Dr Chalmers said there was nothing wrong with families earning $530,000 receiving extra government support for childcare because it was not a welfare measure but a “key economic reform”.

“This isn’t a welfare measure. This is about making sure more women are participating in work, it is about making sure that more Australian women can grab the opportunities when the economic recovery comes,” Dr Chalmers told Sky News.