Regional Australia the big losers in Stage 3 tax cuts, new report reveals

Contentious tax cuts will ‘widen the economic divide between the wealthy and people who are struggling’, a new report shows.

Contentious stage three tax cuts risk further exacerbating the divide between wealthy city-dwellers and lower-income regional citizens, new analysis has revealed.

A new report by the Australia Institute has found that of the 20 electorates that will benefit the least from the tax breaks, 12 are in rural Australia and four alone are in Tasmania; while of the 20 electorates to reap the most from the tax changes, 17 are in inner-metropolitan areas of predominantly Sydney and Melbourne.

Stage three tax cuts are the last – and most controversial – phase of the former Morrison government’s legislated changes to personal income tax.

Coming into effect in July 2024, workers earning between $45,001 and $200,000 will pay the same tax rate – with people earning more than $180,000 the biggest beneficiaries of the changes.

The total cost is expected to exceed $254 billion, yet the Albanese government has maintained its commitment to the tax cuts.

The new report, by senior economist Matt Grudnoff, found of all the 151 electorates in the country, North Sydney is on track to be the biggest beneficiary of the tax cuts, set to pay $331m less tax each year. In comparison, Lyons in Tasmania will pay just $39m less tax per year.

Fourteen per cent of North Sydney taxpayers earn more than $180,000 a year, while in Lyons only one per cent of the population fit this tax bracket.

“This data shows the bush and rural electorates will largely miss out on what are effectively tax cuts for rich people in the big smoke,” Mr Grudnoff said.

Tasmanian Greens senator Nick McKim said the report was evidence of the “grossly disproportionate and unfair” stage three tax cuts.

Of the 20 electorates set to benefit the least from Stage 3 tax cuts, 12 are in rural and regional Australia and four alone are in Tasmania.

More than half of the 20 electorates that will benefit the most from Stage 3 tax cuts are in Sydney.

“What this report shows for Tasmania and other regional areas around the country is that Labor is turning its back on those areas by proceeding with these tax cuts,” he told NCA NewsWire.

“It’s a massive transfer of wealth from people in regional areas, to boost the bank accounts of very wealthy people living in inner-cities.

“These tax cuts are clearly going to widen the economic divide between the wealthy and people who are struggling, and they are clearly going to widen the divide between regional Australia and metropolitan areas.”

Greens Senator Nick McKim said the tax cuts would further divide Australians. Picture: NCA NewsWire / Gary Ramage

Fellow Tasmanian senator, from the Jacqui Lambie Network, Tammy Tyrrell said the tax cuts would do little to help the people struggling in her state.

“Here in Tassie, people are skipping meals and struggling with their power bills. A $254bn tax cut isn’t going to help a single one of them. All it’s going to do is make it harder for the government to pay for things that might actually help us here,” she said.

Noting that Labor-held Lyons – the state’s largest electorate – was to be the worst-off seats in the country, Senator Tyrrell called on the Albanese government to postpone stage three by a year and take it to the next election.

“Lyons is getting the least of any electorate in the country, but it’s represented by an MP who’s yet to come out against these expensive and unaffordable tax cuts,” she said.

“Stage 3 should be postponed by a year, revised, and taken to the next election.

“Let the people of Lyons decide if they’d rather have a fully-funded aged care system or a tax break that lets millionaires in Mosman buy a more expensive Tesla.”

Treasurer Jim Chalmers says the government remains committed to stage three tax cuts. Picture: NCA NewsWire / Martin Ollman

The changes will increase the annual income threshold at which the top tax bracket is applied from $180,001 to $200,000; remove the second-highest bracket which previously applied tax at 37 per cent on incomes between $120,001 and $180,000; and lowers the tax rate for the new bracket for earners between $45,001 to $200,000 to 30 per cent.

Prime Minister Anthony Albanese – when asked about the future of the stage three tax cuts on Tuesday – maintained there has been “no change in the government’s position”.

Treasurer Jim Chalmers was contacted for comment, while Nationals Leader David Littleproud was unavailable for comment.

Originally published as Regional Australia the big losers in Stage 3 tax cuts, new report reveals