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Stage 3 tax cuts to feature in May budget, Treasurer confirms

4 minute read

Stage three tax cuts will feature in the government’s May budget, the Treasurer has confirmed.

Treasurer Jim Chalmers confirmed on Tuesday that the Labor government’s second budget, scheduled for May, would include stage three tax cuts, despite the need to “trim spending” in light of “difficult global conditions”.

Speaking on Channel 9’s Today Show, Mr Chalmers said: “They’ll [stage three tax cuts] be in the budget in May”.

“As we’ve said before, our position on those stage three tax cuts hasn’t changed.”

Stage three tax cuts, due to kick in on 1 July 2024, are set to abolish the 37 per cent tax bracket applied to income between $120,000 and $180,000 and reduce the 32.4 per cent tax rate to 30 per cent for all incomes between $45,000 and $200,000.

Despite appearing open to re-evaluating the tax cuts if inflation remained an issue last year, the Treasurer has now confirmed that the government will push ahead with them.

At the same time, it has been confirmed that the government will not be extending the low- and middle-income tax offset, resulting in individuals earning less than $126,000 having up to $1,500 less in their pockets compared to the previous year.

“We have indicated we will be trimming spending further in the May budget but that’s so that we can make room to fund the things that we value whether it’s health care or aged care, the NDIS, protecting our borders and our national security. These are important priorities for a budget, which will be responsible and sustainable in the context of these difficult global conditions,” the Treasurer said on Tuesday.

“One of the defining influences on the budget in May will be the uncertain global conditions and what that means for inflation and cost of living and interest rates here at home. We know that people are under pressure, the budget is under pressure as well, and we’ll strike the right balance as we go about dealing with those challenges,” the Treasurer added.

In October last year, Assistant Treasurer Stephen Jones cited “differences in opinion” within the Labor government regarding the legislated stage three tax cuts.

Namely, he told SkyNews at the time that while the government remained committed to supporting the package, the economic environment, including the height of inflation, would inform the intended start date of the tax cuts.

‘Inequality is on steroids’

Also on Tuesday, the Australian Institute asserted that inequality is on “steroids” in Australia in a new research paper. 

Namely, it pointed to new data which revealed that the bottom 90 per cent of Australians received just 7 per cent of economic growth per person from 2009 to 2019, while the top 10 per cent of income earners reaped 93 per cent of the benefits.

Hoping to increase pressure on the government to reconsider the stage three tax cuts, Matt Grudnoff, senior economist at the Australian Institute, said: “Stage three tax cuts, which see people earning over $180,000 receiving the lion’s share of benefits while minimum wage workers get nothing, will only make the inequality problem worse”.

“Australians have a strong sense of fairness, and they know when they’re being ripped off or missing out on their fair share. And right now, Australians know they are missing out.”

Mr Chalmers was previously a fierce opposer of the stage three tax cuts, referring to them as the “least affordable, least fair and least likely to be effective”. But his opinion changed ahead of the 2022 federal election, with the now Treasurer pledging his support for the policy mid-2021.  

Maja Garaca Djurdjevic

Maja Garaca Djurdjevic

Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.