Tax cut backflip ‘about aspiration’, says treasurer

Treasurer Jim Chalmers insists breaking an election promise on tax cuts for the “right reasons” can help build trust, as the prime minister prepares to pitch the amended proposal to the country.

Jan 25, 2024, updated Jan 25, 2024
Treasurer Jim Chalmers. Photo: AAP/Mick Tsikas.

Treasurer Jim Chalmers. Photo: AAP/Mick Tsikas.

Anthony Albanese will use a National Press Club address on Thursday afternoon to outline his case for overhauling stage three tax cuts, which will put an extra $800 per year into the pockets of middle-income earners.

Chalmers defended the government’s new proposal and said its necessity had become increasingly clear over the holiday period.

“We know that decisions like this, which are contentious, they will always have their supporters and their detractors,” he told Seven’s Sunrise.

“This is about aspiration – it’s about people who work hard being able to provide for their loved ones and get ahead.

“This is about people, not politics … you build trust by taking the right decisions for the right reasons, even when the politics are difficult.”

In extracts distributed ahead of his speech, Albanese said the government was choosing a better way forward.

“This is a plan for middle Australia that delivers for every Australian taxpayer, right up and down the income ladder,” he said.

Most workers will be better off than they would have been under the existing package, while the benefit for those on the highest incomes will be halved.

Under the changes, due to take effect on July 1, a person earning an average wage of $73,000 will get a tax cut of more than $1500 a year.

Those earning $50,000 will pocket an extra $929 a year while people on $100,000 will receive $2100.

Households on an average income of $130,000 will receive $2600.

At the upper end, the stage three tax cuts for those earning $200,000 will be slashed from $9075 to $4500.

When the stage three tax cuts were introduced by the coalition in 2018, the Australian economy was expected to be supported by strong global conditions.

Inflation and interest rates were expected to remain low.

“Unanticipated global events meant these projects have not come to pass,” Albanese said, quoting Treasury advice.

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He cited the same advice to quash fears of putting pressure on inflation.

The lowest rate on income tax will be reduced from 19 to 16 cents in the dollar, meaning workers will pay less on the first $45,000 they earn.

The low-income threshold at which the Medicare levy kicks in will also be increased.

The second tax rate will be reduced from 32.5 to 30 per cent for people earning up to $135,000.

Labor will retain the 37 per cent rate for people earning over $135,000 and the top tax rate of 45 per cent will kick in at $190,000 rather than $180,000.

Albanese said the tax cuts were “fairly and squarely focused on middle Australia”.

“Our government understands that middle income Australians need help with the cost of living now more than ever,” he said.

Labor MPs endorsed the tax package during a snap meeting on Wednesday, ahead of Albanese’s speech to open the political year.

But the opposition has accused Mr Albanese of breaking his word and engaging in class warfare.

“A more generous tax cut for one Australian should not come at the expense of what another Australian was promised,” Deputy Opposition Leader Sussan Ley told ABC radio on Thursday.

Labor will roll out an ad campaign to explain the changes to Australian workers, with Albanese promising further relief.


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