Stage three tax cuts

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The stage three tax cuts are a taxation policy overseen by the Australian Government, scheduled to come into effect in mid-2024. Originally forming the third and last stage of the Turnbull government's personal income tax reforms, stage three was altered in the Morrison government's 2019 budget to include an additional A$90 billion of tax cuts. [1]

Contents

Stage three has been the subject of significant political discussion and controversy in Australian politics, and has been a significant wedge issue. During the 2022 Australian federal election campaign, the Coalition and Australian Labor Party both stated their full support for retaining stage three, whereas the Australian Greens and several independent MPs argued for its modification or abolition. In January 2024, the Albanese government announced modifications to stage three that reduced the overall cost and gave larger cuts to individuals earning under A$200,000.

2018

The original suite of tax cuts were legislated by the Turnbull government as the Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018. [2] Stage three is scheduled to take effect on 1 July 2024. [3]

All three stages were part of the same legislation, with Treasurer Scott Morrison stating this was done to provide "certainty". [4]

Following amendments, the final legislation passed the House of Representatives with the support of the Coalition, Bob Katter and independent MP Julia Banks. [5] The bill was opposed by Labor, the Greens and two independents; Cathy McGowan and Andrew Wilkie. [5]

2019

In the lead-up to the 2019 federal election, Labor made a number of criticisms of stage three. Shadow treasurer Chris Bowen stated in April 2019 that it was "neither fair nor responsible to lock in billions of dollars of tax giveaways that disproportionately benefit a relative few - and so far into the future”. [6] Shadow finance minister Jim Chalmers stated that "the last stage of tax cuts can only be funded by budget cuts". [7]

Following the Morrison government's victory at the federal election on 18 May, treasurer Josh Frydenberg handed down his budget. In it, the stage three tax cuts were modified to cut taxes by a further A$90 billion. [1] This change brought the total cost of stage three to A$254 billion over the 2024-2034 period. [1]

The legislation was passed on 4 July 2019, and was entitled "Treasury Laws Amendment (Tax Relief so Working Australians Keep More of Their Money)". [8] [9] Opposition leader Anthony Albanese unsuccessfully proposed amending the name of the bill to "Treasury Laws Amendment (Tax Relief So Working Australians Keep More of Their Money But Not For a Really Long Time)." [9]

Labor voted for the A$158 billion dollar tax plan in both chambers of parliament, but leader Anthony Albanese stated that they had done so as not to block the earlier stages from benefiting "working Australians". [10] In the Senate, the legislation was supported by the Coalition, Labor, Jacqui Lambie and the Centre Alliance, and was opposed by the Greens. [8] Labor unsuccessfully proposed amending the legislation to delay stage three and bring stage two of the tax cuts forward. [8]

2020

In September 2020, The Australia Institute published a report stating that the majority of the stage two and three cuts would benefit the top 10% of earners. [11]

2021

In July 2021, the Labor party held a party room meeting where they decided that if they formed government, they would retain stage three. [12]

2022

After becoming Prime Minister, Anthony Albanese ruled out altering or abolishing stage three. [13]

In August 2022, federal crossbenchers voiced their opposition to stage three. David Pocock, Jacqui Lambie, Dai Le, Monique Ryan, Bob Katter and Andrew Wilkie stated that stage three should be abandoned, and Rebekha Sharkie stated that the timing of stage three "should be reconsidered". [14] Pauline Hanson stated her support for stage three being implemented. [14]

In the same month, the Parliamentary Budget Office released a report, commissioned by the Australian Greens. The report stated that stage three would provide around twice as much benefit to men as to women, and that 48% of the benefits of stage three would go to those earning above A$180,000. [15]

In October 2022, former Prime Minister Malcolm Turnbull stated that he did not believe the cuts should be implemented, due to their cost, and that Labor had made a mistake by committing to implement them at the 2022 federal election. [16]

2023

Independent members of the Australian Parliament advocated for restructuring of stage three, including Dai Le, David Pocock and Monique Ryan. [17]

2024

In January, the Albanese government announced changes to the stage three tax cuts. The changes mean that individuals earning between A$45,000 to A$150,000 will pay A$804 less tax compared to the previous stage three plan. For those earning over A$200,000, the cut is reduced by half. [18]

Response to changes

Coalition

The Coalition has accused Albanese and the government of lying and breaking an election promise by changing aspects of stage three. Deputy Liberal leader Sussan Ley stated that Labor "lied about these tax cuts", [19] and shadow Treasurer Angus Taylor stated that the decision was "the mother of all broken promises”. [20]

Initially, several figures in the Coalition suggested that they would oppose the government's changes. On 23 January, Taylor stated that the Coalition would "absolutely not" support any changes to the tax cuts. [21] On 25 January, Ley stated that the Coalition's position was to "support the existing stage three arrangements", [19] and opposition leader Peter Dutton stated that the changes were significant enough that the government should hold an election to get a mandate for them. [22] On 26 January, Dutton stated that the Coalition was wanting to "understand the costings" before making a decision about supporting the changes. [23]

On 6 February 2024, the Coalition announced that they would support the government's amended legislation in Parliament. [24] The legislation passed through the House of Representatives on 15 February, and passed through the Senate in an evening sitting of 27 February. [25] [26]

Greens

Greens leader Adam Bandt stated on 26 January 2024 that the changes to stage three were not sufficient for assisting low- and middle-income earners. [27]

Public opinion

A poll conducted by The Australia Institute in September 2022 found that 41 percent of respondents supported a repeal of the stage three tax cuts, while 22 percent were opposed. [28] Another poll by the Australia Institute in October 2023 found that in a cohort of voters informed of the cost to the budget and who benefitted from the tax cuts, 25% of respondents supported repealing the tax cuts, and 44% stated they should be restructured. [29] 17% were in favour of retaining stage three in an unchanged form. [29]

After the Albanese government announced changes to the tax cuts in January 2024, a poll by Newspoll found that 62 percent of those surveyed were supportive of the changes. [30]

Polling by the Australia institute in the Division of Dunkley in the lead-up to the 2024 Dunkley by-election found that 66% of residents surveyed supported the government's changes to stage three. [31]

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References

  1. 1 2 3 Morgan, Elysse (20 October 2022). "Massive cost of stage 3 tax cuts due to 'regrettable' changes by Morrison government, Turnbull says". ABC News. Archived from the original on 5 February 2024. Retrieved 5 February 2024.
  2. ↑ "Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018". Australian Parliament House. 21 June 2018. Archived from the original on 5 February 2024. Retrieved 5 February 2024.
  3. ↑ Janda, Michael; Hutchens, Gareth (5 October 2022). "How the stage 3 tax cuts save an average earner $1,250 but someone on $200,000 more than $9,000". ABC News. Archived from the original on 5 February 2024. Retrieved 5 February 2024.
  4. ↑ Martin, Peter (10 May 2022). "Stand by for the oddly designed Stage 3 tax cut that will send middle earners backwards and give high earners thousands". The Conversation. Archived from the original on 5 February 2024. Retrieved 5 February 2024.
  5. 1 2 "Divisions of the Australian House of Representatives: Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018". Australian Parliament House. 21 July 2018. Archived from the original on 5 February 2024. Retrieved 2 February 2024.
  6. ↑ Karp, Paul (8 April 2019). "Coalition's move to flatten tax brackets will cost $147bn, new analysis finds". The Guardian. ISSN   0261-3077. Archived from the original on 5 February 2024. Retrieved 5 February 2024.
  7. ↑ Kelly, Sean (14 August 2022). "Why Albanese needs to get real on tax cut talk". The Age. Retrieved 23 February 2024.
  8. 1 2 3 Worthington, Brett; Dalzell, Stephanie (4 July 2019). "Full $158b tax cut plan passes Parliament with bipartisan support". ABC News. Archived from the original on 8 February 2024. Retrieved 15 February 2024.
  9. 1 2 Dalzell, Stephanie (2 July 2019). "Future of Coalition's $158 billion tax plan now rests in hands of the Senate". ABC News. Archived from the original on 15 February 2024. Retrieved 15 February 2024.
  10. ↑ Martin, Sarah (4 July 2019). "Coalition's income tax cuts pass Senate in full as Labor backs down". The Guardian. ISSN   0261-3077. Archived from the original on 29 May 2023. Retrieved 5 February 2024.
  11. ↑ Grudnoff, Matt (September 2020). "Early tax cuts as stimulus" (PDF). The Australia Institute. Archived (PDF) from the original on 25 December 2023. Retrieved 5 February 2024.
  12. ↑ Dalzell, Stephanie (26 July 2021). "Labor vows to keep stage 3 tax cuts for wealthy Australians". ABC News. Archived from the original on 16 February 2024. Retrieved 17 February 2024.
  13. ↑ Jervis-Bardy, Dan (28 May 2022). "Labor committed to tax cuts despite budget troubles". The Canberra Times. Archived from the original on 5 February 2024. Retrieved 5 February 2024.
  14. 1 2 Galloway, Anthony (27 August 2022). "Crossbenchers urge Labor to scrap stage three tax cuts". The Sydney Morning Herald. Archived from the original on 13 November 2023. Retrieved 23 February 2024.
  15. ↑ Galloway, Anthony (20 August 2022). "'Unfair': Tax cuts for highest income earners to give men double the amount as women". The Age. Archived from the original on 30 November 2023. Retrieved 23 February 2024.
  16. ↑ Morgan, Elysse (20 October 2022). "Massive cost of stage 3 tax cuts due to 'regrettable' changes by Morrison government, Turnbull says". ABC News. Archived from the original on 5 February 2024. Retrieved 16 February 2024.
  17. ↑ Karp, Paul (27 October 2023). "Crossbenchers urge Labor to have 'courage' on changes to resources tax and stage-three tax cuts". The Guardian. ISSN   0261-3077. Archived from the original on 13 December 2023. Retrieved 5 February 2024.
  18. ↑ Hegarty, Nicole (30 January 2024). "Greens cite PBO analysis showing reshaped stage 3 tax cuts still favour highest earners". ABC News. Archived from the original on 5 February 2024. Retrieved 5 February 2024.
  19. 1 2 Karp, Paul (24 January 2024). "Sussan Ley retreats from comments suggesting Coalition would repeal Labor's stage-three tax cut changes". The Guardian. ISSN   0261-3077. Archived from the original on 8 February 2024. Retrieved 8 February 2024.
  20. ↑ Karp, Paul (22 January 2024). "Greens warn Labor stage-three tax cuts will add to inflation and bring little relief for most workers". The Guardian. ISSN   0261-3077. Archived from the original on 29 January 2024. Retrieved 12 February 2024.
  21. ↑ Crowe, David (23 January 2024). "'Absolutely not': Coalition promises to fight any changes to stage 3 tax cuts". The Sydney Morning Herald. Archived from the original on 24 January 2024. Retrieved 12 February 2024.
  22. ↑ Karp, Paul; Butler, Josh (25 January 2024). "Peter Dutton calls for election over 'very significant change' to stage-three tax cuts". The Guardian. ISSN   0261-3077. Archived from the original on 15 February 2024. Retrieved 15 February 2024.
  23. ↑ Butler, Josh (26 January 2024). "Peter Dutton refuses to commit to stage-three tax cut changes as Labor begins negotiations with Greens and crossbench". The Guardian. ISSN   0261-3077. Archived from the original on 15 February 2024. Retrieved 15 February 2024.
  24. ↑ Karp, Paul; Butler, Josh (6 February 2024). "Stage-three tax cuts: Labor's changes to pass parliament with Coalition support". The Guardian. ISSN   0261-3077. Archived from the original on 8 February 2024. Retrieved 8 February 2024.
  25. ↑ "'Great day' as revised stage three tax cuts clear first major hurdle. Here's what we know". SBS News. Associated Press. Archived from the original on 17 February 2024. Retrieved 17 February 2024.
  26. ↑ Remeikis, Amy (28 February 2024). "Australia politics live: Lidia Thorpe accuses Senate chair of being 'asleep' amid chaotic end to evening session". The Guardian. ISSN   0261-3077 . Retrieved 28 February 2024.
  27. ↑ "Greens want more stage three tax cut changes as Anthony Albanese flags negotiations". SBS News. Associated Press. Archived from the original on 21 February 2024. Retrieved 23 February 2024.
  28. ↑ "Polling – Stage 3 income tax cuts" (PDF). The Australia Institute. 2 October 2022. Archived (PDF) from the original on 16 November 2023. Retrieved 7 February 2024.
  29. 1 2 Davis, Miriah (26 October 2023). "New polling finds a majority of Aussies support changing or axing Stage 3 tax cuts". 9 News. Retrieved 28 February 2024.
  30. ↑ Grattan, Michelle (4 February 2024). "Newspoll shows support for Albanese's tax decision, as the PM defends his reputation as 'an honest person'". The Conversation . Archived from the original on 7 February 2024. Retrieved 7 February 2024.
  31. ↑ "Polling: Stage 3 Tax Cuts in Dunkley". The Australia Institute. 9 February 2024. Retrieved 28 February 2024.
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