Money Finance News How you will fare under the two parties’ tax breaks
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How you will fare under the two parties’ tax breaks

Which party has the sweeter deal is a question of how much you earn. Photo: Getty
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The federal election has been framed as a referendum on wages. Or rather a referendum on tax relief as a form of wage boost for workers frustrated by years of sluggish wage growth.

Since last year’s budget, it’s been a dizzying roundabout of tax offsets, bracket changes, offers and counter offers.

To cut through the confusion, let’s recap on what has happened so far.

The Coalition showed its hand in last year’s budget with $144 billion worth of cuts in its low- and middle-income tax offset (LMITO) to take effect in the current financial year, when people lodge their 2018-19 tax returns.

Under that legislation, singles earning between $48,000 and $90,000 would have been eligible for a maximum offset of $540, tapering off to zero when it reaches a taxable income of $126,000.

Labor last year countered with its “bigger, better, fairer tax cuts”, only for the Coalition to up the ante by doubling its original offset in the April 2 budget, increasing the $540 to a maximum of $1080.

The government claimed the doubled offset would benefit 10 million Australians, with 4.5 million receiving the maximum amount of $1080.

In his budget reply speech, Labor leader Bill Shorten then matched the Coalition’s revised proposal, but added an extra tax offset for 3.6 million people earning less than $48,000 a year.

“Labor will provide a bigger tax cut than the Liberals for 3.6 million Australians all told, an extra $1 billion for low-income earners in this country,” Mr Shorten said.

“Here’s the simple truth – 6.4 million working people will pay the same amount of income tax under Labor as the Liberals. Another 3.6 million will pay less tax under Labor.”

how will you fare under the two parties' tax cuts
Bill Shorten matched the Coalition’s cuts, and included a special offset for people earning less than $48,000. Photo: Getty

So who do Australians vote for to get the biggest immediate tax cut?

As the table below shows, there is now little difference between the two major parties – apart from those earning up to $48,000 a year – and everyone would receive one or other offset when they submit tax returns after June 30 – assuming they are legislated in time.

Here’s how the two parties’ 2019 tax cuts stack up.

Coalition wins long term – but there’s a catch

But the longer term is where the two parties diverge. And how.

Parliament has already passed the government’s original “seven-year personal income tax plan”, outlined in last year’s budget, which Labor will repeal if it becomes the government.

Under that legislation, the top income threshold for the 19, 32.5 and 37 per cent tax brackets will rise from July 2022.

Then in 2024, the 37 per cent bracket will be eliminated, while the threshold for the top 45 per cent tax rate will also be lifted to $200,000.

On budget night, the government boosted that offer by proposing the reduction of the 32.5 per cent tax bracket to 30 per cent for people earning between $45,000 and $200,000, but not until 2024.

Those changes would mean a person earning $60,000 would have a tax offset of $1455 by 2024-25, while someone earning $120,000 receive $4440 – twice the income but more than three times the tax relief.

So, this is how you’d fare under the Coalition’s 2022 and 2024 tax cuts. But remember, for you to receive these offsets, the Coalition will have to win not only this election, but also the next.

 

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