Tax cuts for the “top end of town” could be waved through Parliament by Labor as it considers putting the Prime Minister under pressure to deliver on his tax cuts and his promised surplus.
Labor on Tuesday accused Scott Morrison of his first broken promise over potential delays to planned $1080 tax cuts, and is now considering how it will respond in the Senate.
It means a tax showdown looms in the Parliament, with the Treasurer signalling that he will combine tax cuts for low and middle income earners of $1080 in planned legislation along with cuts for higher income earners.
That’s designed to force Labor and the cross bench to support the Liberals’ $77 billion tax cuts for the rich – or risk denying tax relief now for workers earning under $126,000.
By combining the $1080 tax cuts for low income earners with 2024 plans for higher income earners the PM sets up a tax showdown in the Senate where if Labor doesn’t back the tax cuts for wealthy the poor miss out on relief now https://t.co/VArp4uH2y5
— 𝕤𝕒𝕞𝕒𝕟𝕥𝕙𝕒 𝕞𝕒𝕚𝕕𝕖𝕟 (@samanthamaiden) May 21, 2019
“It is important it is dealt with in a package. We are talking not just about immediate tax relief but long-term structural reform,” Mr Frydenberg said.
“It has been our message to the Australian people at this election.”
The radical solution of Labor simply supporting the Liberals’ entire package would ensure that 10 million workers are not denied relief as a result of a Senate stand off.
But it would also involve Labor supporting future tax cuts it claims are worth $77 billion for people earning over $180,000 a year.
While Labor considers the option of supporting the entire package, the opposition’s treasury spokesman, Chris Bowen, said his preferred option remained to not to support the high income tax cuts.
“Well, my view is … we support stage one, we don’t support stages two and three – so the best thing the government could do is stop playing games, separate the tax cuts into separate programs, and see the tax cuts delivered on the 1st of July,” he said Wednesday.
Any decision on whether Labor will accept the Prime Minister’s election mandate and support the entire tax package is likely to be delayed for weeks by the ALP’s leadership ballot.
During the election campaign, Bill Shorten slammed the tax cuts as “fiscally reckless income tax cuts for the top end of town”.
But some Labor MPs believe Mr Morrison should be forced to deliver what he promised and cop the budget consequences.
“Right now, I am of a mind that we should boil a big pot, and put the Prime Minister in it,” a Labor MP told The New Daily.
If Labor doesn’t support the tax cuts Mr Morrison will need crossbench senators including Centre Alliance’s Rex Patrick.
“We would like to give hard working Aussies a tax cut, but in the face of a softening economy we need to be sure that it will not result in cuts to education/health/aged care or other pensioner services in a year or two,” Senator Patrick said.
Meanwhile, the Treasurer has conceded workers may face delays in securing promised $1080 tax cuts from July 1 and it could be split into two payments.
The Treasurer is proposing to pay the tax refunds as soon as they pass Parliament, at some point in the next financial year.
Just three days after the election, the Morrison Government has revealed it has now been advised that July 1 timetable is too tight to finalise the election result, issue the writs and recall Parliament.
A spokeswoman for the Prime Minister was unable to confirm to The New Daily when the advice was received or who provided the advice.
“Tax relief will be delivered in 2019-20 as promised,” a spokeswoman for the Prime Minister said. “And will not be delayed by a year by the parliament not sitting in June as speculated in the media today.”
In fact, Mr Morrison did not promise tax relief in the 2019-20 financial year but a $1080 tax cut for the 2018-19 year – to be paid from July 1.
During the election the Treasurer and the Prime Minister repeatedly denied the tight timetable to legislate before June 30 would be an issue despite warnings from Labor, the AEC and the Clerk of the Senate.
Mr Bowen said Mr Morrison had lied.
“The election is not even a couple of days over and Scott Morrison has broken his promise. And it’s worse than that – he lied about it,” he said.
An Australian Tax Office spokesman confirmed it could not deliver the tax cuts unless and until the Parliament passes the laws.
“Following media commentary we would like to clarify that in respect of announced tax cuts, while we do need law change there are also things we can do administratively,” he said.
“For example, if the Labor Party agrees to support the Coalition tax cuts as announced, then we would be able to update the tax withholding schedules, to allow the tax cuts to be reflected in people’s take home pay. However, we could not issue assessments based on the tax cuts until these are passed into law.
“If the law for these tax cuts passes after June, we could also retrospectively amend assessments to provide the tax cut once the law is passed.”
However, the Treasurer’s office later confirmed that the ATO could not deliver the $1080 low and middle income offset administratively or via tax withholding schedules because it is a an offset paid as a lump sum.
The Prime Minister’s office also confirmed this was the case and that it cannot be paid into workers’ pockets unless it had passed Parliament.
— 𝕤𝕒𝕞𝕒𝕟𝕥𝕙𝕒 𝕞𝕒𝕚𝕕𝕖𝕟 (@samanthamaiden) May 21, 2019