Key Points
- Anthony Albanese has promised to focus on financial relief for low and middle-income earners.
- It has sparked debate about whether a change in stage three tax cuts is on the table.
- Experts have weighed in on two measures to make the stage three tax cuts more "fair" for Australians.
Prime Minister Anthony Albanese has vowed to help middle-income earners doing it "tough", fuelling suspicions he will amend the controversial stage three tax cuts.
"I support tax cuts and everyone will be getting a tax cut," he told Sydney radio station KIIS FM on Tuesday.
"What we're doing is looking at how we can help low and middle-income earners, middle Australia particularly is doing it really tough, people have a mortgage, so we're looking at ways in which we can provide assistance to them."
The comments come ahead of , two weeks before parliament typically resumes in February.
Under the stage three cuts, a single tax bracket of 30 per cent would apply to people earning between $45,000 and $200,000 annually.
Experts have suggested the stage three tax cuts could be reformed to offer relief to , but the Opposition says that would mean breaking an election promise.
The cuts are due to come into effect on 1 July.
Why is Anthony Albanese facing pressure to change the stage three tax cuts?
Greg Jericho, chief economist at think tank the Australia Institute, said the stage three tax cuts will be lining the pockets of those who don't need it, potentially adding to inflation.
"The biggest problem is that in a period of cost of living crisis, the stage three tax cuts aren't really delivering much benefit to those who have hurt the most — low and middle income earners," he told SBS News.
The policy will provide the biggest tax cuts to those on $120,000 or more and is estimated to cost the government roughly $320 billion over 10 years, as laid out by then treasurer Scott Morrison in 2018.
Jericho said inflation has pushed up prices of essential items and the government has "an onus" to help low and middle income earners hurting most as a result.
Under the current legislation, low-income earners on less than $45,000 will not get any relief while a middle-income earner on $80,000 will pocket an extra $16.80 a week.
In contrast, he said giving an extra $9,075 to those on with savings buffers could "put pressure on inflation" as additional money would be spent on non-essential and luxury items.
On Monday, shadow treasurer Angus Taylor said any alterations to stage three cuts would represent a broken election promise and reminded Albanese that Australians voted for the policy at two elections.
Australian National University associate professor Ben Phillips said outside keeping a promise, there was no economic benefit to keeping the legislation in its current form.
"There's not really particularly good economic or tax policy reasons for persisting with them," he told SBS News.
"Obviously, it does provide some relief to some families … But the tax cut for middle-income families from stage three is almost negligible. It's mostly high-income families that get the most benefit and they're not really facing serious cost of living pressures."
How could the stage three tax cuts be changed?
Jericho said it was important for the government not to be wedded to the idea of keeping the stage three cuts as they are, with both experts offering two main ways they can be made more equitable.
"All you would need to do is limit the amount that is going to people at the top and you're able to deliver much bigger tax cuts to people on low and middle-income earners, making it a lot fairer," Jericho said.
He backed calls for the government to retain the current 37 per cent tax rate for those earning between $120,000 and $180,000.
"You need to remember that only about 20 per cent of people earn above $125,000 or $130,000," he said.
Phillips agrees this would address concerns of the tax cuts being "unfair".
He also reiterated suggestions the Albanese government could increase the tax-free threshold.
"Increase the first, the tax-free threshold that currently sits at $18,200 and it could be increased to say $20,000 or even a little bit above that," Phillips said.
"And that's certainly something that would help middle-income families and to some extent some low-income families … the people struggling the most with cost of living pressures."
