Treasurer Josh Frydenberg will challenge Labor to back the government's full $158 billion income tax cut when Parliament resumes in the new financial year, amid an argument over the government's delay to the first round of tax relief for millions of workers.
Mr Frydenberg made it clear the government would put the full package to the Parliament rather than splitting the draft bill to make it easier for Labor to back the tax cuts for those on lower incomes while rejecting those for wealthier workers.
With Labor in flux over its leadership and its policies, the government will seek to legislate the entire seven-year tax plan despite statements from key Senate crossbenchers who reject the government's mandate for the full plan.
"It is important that this is dealt with as a package because we are talking about not just immediate tax relief but also long-term structural reform," Mr Frydenberg said.
"That's been our message to the Australian people at this election.
"That's why we took this package of tax measures to the Australian people at this election. And they voted on it. And they voted to support the government."
The first part of the package is a tax offset worth up to $1080 that is due to be paid after July 1 but cannot be legislated in time after Prime Minister Scott Morrison conceded it was "very unlikely" he could convene Parliament in time.
The delay is the result of the government's decision to hold the election on May 18 and allow for the return of the writs on June 28, leaving it without enough time to pass the tax law by June 30.
Mr Morrison said on April 3 that the Australian Tax Office could "administer" the tax cut if Labor said it would support the changes, but the ATO made it clear it needed the passage of a law.
"If the law for these tax cuts passes after June, we could also retrospectively amend assessments to provide the tax cuts once the law is passed," the ATO said in April.
Labor treasury spokesman Chris Bowen said this meant Mr Morrison was "breaking promises" by not delivering the tax offset on time.
The tax offset is part of the Coalition pledge to cut personal income taxes by $158 billion over the decade ahead, on top of a cut worth $144 billion announced in last year's budget.
The tax cuts legislated last year included an offset worth up to $530 a year, paid to taxpayers after they lodge their tax returns.
The Coalition went to the May 18 election with a plan to add another $550 to the offset from July 1, taking the total to $1080.
Under the laws passed last year, a worker earning $22,000 would receive a tax offset of $200 but this would scale up to the point where a worker on $48,000 would receive the full $530. The offset would gradually fall for those earning more than $90,000 and phase out at an income level of just over $125,000.
The same income benchmarks apply to the additional $550 if and when it is legislated.
Because the $530 offset is already legislated, the only delay is to the additional $550, which has Labor support if the government splits the tax cut bill.
Workers who lodge their tax returns before the Parliament convenes could receive the $530 offset, while gaining a supplementary payment after the second offset is legislated.
Those who take several months to lodge their tax returns and do so after Parliament legislates the tax cut would receive the combined offset.
"The ATO have made it very clear that as soon as the legislation is passed, people don't need to put in another tax return - they will ensure that they get the full benefit of that $1080 for those who are eligible," Mr Frydenberg said.
- SMH/The Age