Login
iscover
The changes will affect all income groups but target relief for middle-income earners without fuelling inflation, the prime minister says.
Newsletter
Albanese lays out stage 3 tax cut pivot to ‘benefit all taxpayers’
25 January 2024
•
12 minute read
You’re out of free articles for this month
To continue reading the rest of this article, please log in.
Create free account to get unlimited news articles and more!
Prime minister Anthony Albanese has confirmed sweeping changes to stage three tax cuts to deliver “broader and better” outcomes to all taxpayers and provide targeted cost-of-living relief for low and middle-income earners.
The revised measures involved cutting the lowest rate of income tax from 19 per cent to 16 per cent and the second lowest from 32.5 per cent to 30 per cent, increasing the Medicare levy threshold and the top 45 per cent tax threshold.
In an address to the National Press Club in Canberra today, Mr Albanese said the changes would help ease living costs while boosting workforce participation.
“Australians are looking for more help, Australians deserve more help. And today I can confirm that more help is on the way,” he said.
“All 13.6 million taxpayers will benefit. This is a plan for middle Australia that delivers for every Australian taxpayer right up and down the income ladder. These broader and better tax cuts are not the beginning of our actions on cost of living, and they will certainly not be the end.”
The new-look plan involved a raft of changes affecting every income tax bracket, with the first measure reducing the lowest rate of income tax from 19 per cent down to 16 per cent. The tax-free threshold would remain at $18,200 despite media speculation it would be raised.
==
==
“This change means that taxpayers earning less than $45,000 will now receive a tax cut, and every working Australian will pay less tax on the first $45,000 that they earn,” Mr Albanese said.
He said this would benefit workers on “modest incomes” and part-time workers but also incentivise parents to return to work by increasing their take-home pay. This in turn would help businesses, he said, by increasing workforce participation.
More lower-income earners would also be exempted from the Medicare levy, with the Australian reporting this morning that the threshold would rise from $26,000 to $32,500.
The second tax rate would be cut from 32.5 per cent to 30 per cent and apply for income up to $135,000 to ensure benefits would be “fairly and squarely focussed on middle Australia” who needed help with the cost of living.
The threshold for the top tax rate of 45 per cent would also be increased from $180,000 to $190,000. This would mark the first increase in the threshold for the top marginal tax rate since 2008, he said.
Mr Albanese said a worker on an average wage of $73,000 would receive a tax cut of more than $1,500, which would be double what they would have received under the original plan. A higher-income earner on $190,000 would receive a tax cut of around $4,500.
“Our plan will more than double the benefit for Australians on the average income. And it will look after low-income earners and part-time workers as well,” he said.
The details come after a week of speculation in the media over the government’s plans to depart from an election promise to deliver the Morrison-era tax cuts, due to take effect on July 1.
Mr Albanese said the pivot to focusing on “middle Australia” was not a decision made lightly but was “the right decision for the right reasons at the right time” in light of the COVID-19 pandemic, rising interest rates and “far-reaching” consequences of the war in Ukraine.
“Over summer, I asked Treasury and Finance to present us with options to help people with their cost of living, whilst importantly continuing the fight against inflation,” he said.
He said Treasury and the RBA were satisfied that any inflationary pressures brought on by tax cut-induced spending would be offset by a predicted increase in labour supply.
You are not authorised to post comments.
Comments will undergo moderation before they get published.