Labor is preparing to back the Coalition's $158 billion income tax package as soon as Thursday, as Opposition MPs urge Anthony Albanese to get the issue off the agenda.
Subscribe now for unlimited access.
or signup to continue reading
Labor MPs have been instructed to stay in Canberra on Thursday night, leaving the Morrison government the option of scheduling extra parliamentary sittings on Friday to see a tax cut worth $1080 delivered to workers before millions finalise their tax returns in July.
![Shadow Treasurer Jim Chalmers. Shadow Treasurer Jim Chalmers.](/images/transform/v1/crop/frm/silverstone-feed-data/5544788c-aa1a-4805-9338-c9084e575f9f.jpg/r0_0_800_524_w1200_h678_fmax.jpg)
Parliament resumes on Tuesday for the first time since Prime Minister Scott Morrison's unexpected election victory in May. The three-stage, 10-year tax package would be the first significant legislative milestone of the re-elected Coalition government.
Shadow treasurer Jim Chalmers on Monday said Labor would put all its effort into amendments but "all of the alternatives are available to us if they fail in the Senate".
Labor's proposals would cut out the final stage of the package, worth $95 billion and not scheduled to come into force until 2024-25, and accelerate part of stage two to boost the immediate tax offset to more than $1300.
Mr Chalmers accused the government of holding workers and the economy hostage to tax cuts that would not occur until the mid 2020s.
"We are worried that the government is doing an irresponsible thing here in committing such large sums five years out," he said. "The responsible thing is to give tax cuts now that will boost the economy."
The Reserve Bank of Australia is tipped to cut interest rates again to a new record low of 1 per cent on Tuesday. The decision would be the second successive rate cut in two months and aimed at stimulating the economy out of its worst annual result since the global financial crisis.
Analysts believe the immediate tax offset, scheduled to be delivered with this year's tax returns, is equivalent to a 50 basis point cut in interest rates and will pump cash back into the economy.
The Morrison government is likely to already have enough support from the crossbench to pass the package without Labor, after negotiating a plan to bring down energy prices and cap gas exports with Centre Alliance.
Labor leader Anthony Albanese told a Labor caucus meeting on Monday his concern with the third and most expensive stage of the package was that it would "permanently reduce government spending".
The final stage of the package, from 2024-25, will cost $12 billion a year, matching the total amount of public money spent on medicine. It will also leave little room to spend more money on aged care despite a rapidly ageing population.
But some Labor MPs told caucus they were concerned that prolonged debate about tax cuts would deny them critical air time to raise concerns about other issues such as cuts to Sunday penalty rates, which were reduced by 10 and 15 per cent for 700,000 retail, hospitality and pharmacy workers on Monday.
Mr Chalmers confirmed that if the amendments fail, Labor would try and convene shadow cabinet to make a final sign off on whether to vote for or oppose the package.
He said Labor will lobby the crossbench to back its amendments, including Tasmanian Independent Jacqui Lambie, Senator Lambie is the last vote the government needs to secure to see its package through.
"We intend to have conversations right across the crossbench," said Mr Chalmers.
Treasurer Josh Frydenberg said Labor was the "party of higher taxes" and had "learned nothing" from the election.
Centre Alliance senator Rex Patrick said he was confident the Coalition's package would pass. "There are no roadblocks, just bumps in the road that we have to smooth out," he said.
Senator Lambie has yet to publicly declare her voting intentions but has formed a voting bloc with Centre Alliance that is enough to see legislation through Parliament.
Once fully implemented, the second stage of the tax package will see the $1080 tax cut more than doubled from 2022. By 2024-25, the 37 per cent and 32.5 per cent tax brackets will be eliminated all together - leaving all incomes between $45,000 and $200,000 taxed at the rate of 30 cents in the dollar.
The Grattan Institute found that by 2030 all taxpayers will better off than if there were no changes but some would be better off than others.
Low-and middle-income earners will have an average tax rate 3.7 per cent higher in 2029-30 than they do in 2019, instead of 5.2 per cent higher under current legislation, it said in a a report released on Monday.
But high-income earners will actually be over-compensated for bracket creep. The top 15 per cent of income earners will have an average tax rate 1 per cent lower than they do today.
- SMH/The Age