By David Crowe
Workers will be promised another round of tax cuts before the next election in a Coalition move to force debate on reform after it gave ground in a row with Labor and chose to vote for the revised stage 3 package worth $359 billion over a decade.
Opposition Leader Peter Dutton emerged from a Coalition party room meeting on Tuesday to admit he could not block the Labor tax cuts and would not roll them back if he won power, but he vowed to add to them with further measures announced before the election.
Opposition Leader Peter Dutton will support the stage 3 tax changes, but the battle has just started with Prime Minister Anthony Albanese over systemic reforms.Credit: Alex Ellinghausen
The move will drag out the political contest on tax by raising the prospect of a new Coalition policy to deliver “lower, simpler and fairer” tax rates that could challenge Labor to go beyond the package due to start on July 1.
But it ensures the swift passage of revised stage 3 tax cuts before Easter because Labor expects the Coalition to back the bill without amendments in the final vote, weakening the ability of the Greens to demand changes that might increase benefits for those on the lowest incomes.
The tax package, which delivers about $20 billion to households in its first year, also cleared a potential economic hurdle when Reserve Bank governor Michele Bullock confirmed it would not change the bank’s inflation forecast.
Prime Minister Anthony Albanese greeted the Coalition move with a warning that Dutton and his party room would “roll it back” despite their declaration of support, setting up competing scare campaigns over tax.
Dutton kept up his attacks on Albanese for breaking his election promise on the original stage 3 plan and warned that Labor would make changes to negative gearing on investment properties after getting its way on income tax.
When asked in parliament to rule out changes to negative gearing or capital gains tax, Albanese and Treasurer Jim Chalmers pointed to their past remarks on the topic without giving an unequivocal promise the rules would stay unchanged.
When Dutton asked Albanese to rule out changing the tax treatment of the family home – which is exempt from capital gains tax – the prime minister said nobody would ever do that.
Dutton told reporters the Coalition would take time to develop its new tax policy but would offer “significant” change to the system, and he named waste in government spending as one way to fund the plan.
Shadow treasurer Angus Taylor, Opposition Leader Peter Dutton and opposition finance spokesperson Jane Hume at a press conference at Parliament House on Tuesday.Credit: Alex Ellinghausen
He said it would cost $9 billion a year to deliver a key Coalition objective with the original stage 3 package – which simplified the tax thresholds to help those on higher earnings – and said he could not make that commitment until more policy work was done.
Coalition finance spokeswoman Jane Hume said the policy would offer “lower, simpler and fairer” personal tax rates and would be aimed at workers who aspired to higher incomes, while being fully costed.
Dutton ruled out changes to negative gearing and named the growth of the federal public service as one example of waste in government, but he said the Coalition could not deliver an alternative tax policy costed by the Parliamentary Budget Office within a few weeks.
At issue is the Labor decision to amend the original Coalition package to deliver bigger tax cuts to 11.5 million taxpayers and smaller benefits to about 1.1 million people who earn more than $150,000 a year, raising questions for the Coalition about how they would restore benefits for those on higher incomes.
“The government’s elected, they’ve got the numbers in the parliament, they can make whatever decision they want,” Dutton said.
“They’ve taken the money from stage 3 tax cuts and they’ve applied it to their own policy. We can’t reverse that from opposition, and we wouldn’t seek to reverse it in government.”
Dutton said the opposition did not want to deny Australians tax cuts because “people are hurting because of this government, because of this prime minister”.
“Do we walk away from the principles of stage 3? Absolutely not,” he said.
“We believe there’s a requirement for reform in the system, so we’re not going to stand in the way of tax cuts being delivered and we’ll have more to say in relation to our own policy in due course.”
Treasurer Jim Chalmers introduced the revised tax plan to parliament shortly after midday on Tuesday. While Labor does not need the crossbench to get its way, the package is expected to have support from independent MPs including Monique Ryan, Kate Chaney, Kylea Tink, Sophie Scamps, Zoe Daniel and Allegra Spender.
A key element of the Labor plan applies a 37 per cent tax rate on earnings between $135,000 and $190,000 and unravels a Coalition ambition to remove that tax threshold entirely. The original plan was to apply a rate of 30 per cent for earnings between $45,000 and $200,000.
“If you implement stage 3 now, in addition to what the prime minister has done – and we’ve looked at all of these options – you need to find about $9 billion a year, which is no easy task,” Dutton said.
“There are savings that we can identify from government waste. In administered programs, for example … the government is spending about $92 billion a year, they’ve increased by 10,000 the number of public servants here in Canberra.”
Dutton said another factor in the new Coalition position was that elements of the original package would become “redundant” once the Labor changes took effect and would mean that a worker on a high income would gain an additional $804 if the Coalition stage 3 plan was added to the Labor policy.
“Those design features don’t happen in two weeks, and I think we’d be reckless to come to you today with a policy that’s not costed and that runs to $9 billion a year,” he said.
“I don’t think we could credibly say that we’re in a position to put forward that modified package today, but we’re not saying that we’re walking away from the principles, not saying that we believe that bracket creep is not an issue.”
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