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Labor’s tax cuts will pass Parliament

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The Coalition will support Labor's changes to the stage 3 tax cuts, allowing the re-worked tax relief to pass through Parliament.
The Labor Government's changes to the stage 3 tax cuts will pass through Parliament

Parliament has resumed for 2024, with the Federal Government introducing legislation for its re-worked stage 3 tax cuts.

Labor needed support from across Parliament to legislate the tax relief.
Today, the Coalition confirmed they’ll back the changes, meaning they will pass.

The Government hopes to pass the changes quickly to ensure the tax cuts can take effect from 1 July.

Here’s the latest.

First: income tax

Australia has a “progressive” tax system, which means the more you earn, the more tax you pay. You don’t pay tax for the first $18,200 earned in a year.

Every dollar earned above that is taxed.

Labor committed to keeping the stage 3 tax cuts, a Coalition policy, when it was elected in 2022.

Stage 3

The original stage 3 tax cuts legislated in 2019 stated Australians earning between $45,000 and $200,000 would be taxed at a lower rate of 30%.

The government said it would introduce this plan from 1 July 2024. Any money earned up to $45,000 would continue to be taxed at the same rate.

The original plans were criticised for handing out bigger tax cuts to people on higher incomes.

New plans

Prime Minister Anthony Albanese announced changes to the planned ‘Stage 3’ tax cuts after Labor MPs met in Canberra last month ahead of the scheduled Parliament sitting week.

The proposal includes a tax cut for those who earn between $18,200 and $45,000 a year. Incomes in this bracket will taxed at 16 cents per dollar, down from 19 cents.

Earnings above $135,000 won’t get the reduced tax rate promised under Stage 3. Albanese said the new proposal will benefit an additional 2.9 million people.

Tax Savings Calculator with Stage 3 Tax Cuts

Calculate your tax savings with Stage 3 tax cuts

Parliament

The Government provided its updated legislation to all parties and independent MPs this week, to give them time to consider the changes.

Treasurer Jim Chalmers has now introduced the legislation in Parliament, saying the tax cuts will deliver “sustainable and substantial reform and relief.”

The legislation is now tabled and will be subject to further debate.

Coalition

The Coalition initially made the tax cuts law in 2019. Since Labor won the 2022 election, the Opposition has pressured the Government to move ahead with the cuts.

The Coalition has announced it will support the legislation, but will introduce some amendments (changes), which are not yet clear.

In confirming his party’s support, Opposition Leader Peter Dutton said he “will not stand in the way of providing support to Australians doing it tough”.

Greens

Greens leader Adam Bandt said his party will push for more relief for low and middle income earners amid the cost-of-living crisis.

Bandt ordered analysis on the tax cuts from the Parliamentary Budget Office (PBO), which provides independent advice on how much government policies will cost.

The analysis showed the top 20% of income earners will get about half of the total tax cuts, which Bandt said “will increase inequality”.

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