The government’s $158 billion tax cut package passed the House of Representatives on Tuesday night, with Labor now set to attempt to amend the bill in the Senate.
The first tranche of the three-stage plan will see taxpayers with an annual income of $126,000 and lower eligible for the low and middle income tax offset, with those earning between $48,000 and $90,000 set to receive the maximum $1,080.
Stage two, for the 2022–23 and the 2023–24 income years, will see the first personal rate of income tax of 19 per cent raised to the $45,000 threshold, up from $41,000. The top threshold for the 32.5 per cent tax bracket will also be raised from $90,000 to $120,000.
The third stage, set for 2024–25 and later income years, will see flatter tax brackets, namely 19 per cent for those earning between $18,201 and $45,000, 30 per cent for incomes up to $200,000 and 45 per cent as the highest rate for incomes above $200,000.
While Labor supports the first two stages, it is opposed to the third stage because it believes it benefits higher-income earners more and are too far away to sign off on.
“The Liberals are holding hostage tax cuts for every worker this week to expensive tax cuts in 261 weeks’ time, which won’t do anything to help boost an economy that’s floundering on their watch now,” said shadow treasurer Jim Chalmers in a statement.
Should the tax cuts be passed, individual taxpayers can expect the low and middle income tax offset to be processed automatically without the need to request an amendment, with Treasurer Josh Frydenberg reassuring taxpayers that the ATO was ready to go.
“Now, I've spoken to the Commissioner of Taxation and he has assured me that if the legislation is passed this week and receives Royal Assent, then tax cuts can flow from next week,” said Mr Frydenberg.
“They will be making the changes to their system, they've undertaken the preparatory work and this is important for the Australian people to understand; when they put in their next tax return, from next week if the legislation goes through today, then the tax cuts will flow.”
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Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.