News National Labor demands changes to Coalition tax plan
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Labor demands changes to Coalition tax plan

Anthony Albanese, right, and shadow treasurer Jim Chalmers respond to the Coalition's income tax plan. Photo: AAP
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Anthony Albanese has outlined a new “negotiating position” on tax to bring forward a $1,350 tax cut for workers earning over $90,000 but is delaying consideration on the “economically irresponsible” Stage 3 tax cuts for now.

The New Daily has confirmed shadow cabinet made no formal decision to vote against the entire $158 billion package if these amendments fail. Labor wants the government to split the bill but several frontbenchers still don’t want to block the tax cuts if this approach fails. 

“If the government is prepared to do that in terms of stages one and stages two, while deferring stage three’s consideration to the following sitting of Parliament or whenever they deemed fit to debate it …we would facilitate the passage of those stages through the Parliament next week,” Mr Albanese said.

“We think that stage 3, at a cost of some $95 billion down the track for an economy which is very soft at the moment, which no-one can say what the economy looks like in 2024-25, is really a triumph of hope over economic reality.

“What we know right now is that the economy needs stimulus.”

Finance Minister Mathias Cormann immediately rejected Labor’s olive branch to back only the first two stages of the tax relief plan.

“We will not split our plan to deliver income tax relief to all working Australians,” Senator Cormann said.

“Labor have still not learnt the lessons from the election.

“Our plan prioritises low and middle-income earners, takes the bracket creep monkey off people’s back, is economically necessary and fiscally responsible and, importantly, it is what Australians voted for.”

The decision appears to put the fate of the tax cuts back with the cross bench and Centre Alliance. But Labor may still choose not to insist on amendments.

Centre Alliance Senator Rex Patrick said he had not had any discussions with Labor about the alternative proposal to bring forward tax relief but delay Stage 3.

“They certainly haven’t discussed these specific measures with us,” he told the New Daily.

Stage 1 of the tax cuts, which Labor backed during the election, doubles the end-of-year rebate from $530 to $1,080 tax offset for all workers earning under $126,000. It is to be paid from July 1 when workers lodge tax returns but only when the legislation passes.

Stage 2 of the tax cuts, which Labor announced today it now supports, increases the income threshold for the 32.5 cent rate from $90,000 to $100,000. It was scheduled to commence in 2022.

By bringing this forward to July 1, 2019, workers earning over $90,000 would secure a tax cut of up to $1,350 three years earlier than expected.

The Labor leader wants to delay consideration of the Stage 3 tax relief for now, despite calls from his own frontbencher Joel Fitzgibbon this morning to vote for the entire tax cut package if the government refuses to compromise.

One Labor frontbencher told The New Daily it was “unclear” whether today’s deliberations ruled out the ALP amending the legislation but not insisting on the changes so that it votes for the entire tax package if the government won’t split the bill. Another said it left the door open.

Stage 3 of the tax cuts would drop the 32.5 cent tax rate to 30 cents. The Morrison government has previously legislated the abolition of the 37 cent tax rate in 2024 which means that the combination of both those measures would ensure the majority of workers face a tax rate of 30 cents in the dollar. This new 30 cent rate would apply to all earnings between $45,000 and $200,000 from 2024. The tax cuts are worth $95 billion

“We need action now and some of the government’s proposals, of course, are off in the never never,” Mr Albanese said.

“What we have determined this morning to do is to propose a negotiating position to the government which would bring forward tax cuts faster for those who need it.

“Stage one – of course, we will continue to support that stage and express disappointment that the government has breached its clear commitment to bring in stage 1 by July 1.  For stage 2 – we’re calling for the government to increase the threshold – for the increase of the 37% threshold from $90,000 to $120,000 that is already legislated but is down the track, to bring that forward to 2019-2020.

“This would provide up to $1,350 for all those above $90,000. The costing of that is less than $3.7 billion.”

LABOR WANTS TO FAST-TRACK INFRASTRUCTURE SPENDING

According to the Pre-Election Fiscal Outlook, the forecast surplus for 2019-20 is $7 billion, which means bringing forward the tax cuts would half that amount before the proposed infrastructure spending was included.

“The third thing that we’re saying is the infrastructure investment should be brought forward. This has been proposed by the Reserve Bank of Australia,” Mr Albanese said.

“We know that there are a range of road and rail packages that could be brought forward because they’re ready to go right now. Projects including here in the south-eastern suburbs of Melbourne. Projects in the northern suburbs of Melbourne. The government could, of course, put money into a project like the Melbourne Metro which is what we propose during the election campaign in order to speed-up the delivery of that project.

Prime Minister Scott Morrison delivered his first major post-election speech on Monday urging Australians to spend their tax cuts when they arrive to release the “animal spirits” in the economy.

By failing to back the entire $158 billion tax package Mr Morrison said Labor had failed to respect voters’ wishes.

“Labor have suffered the worst primary vote in an election in 100 years. It’s a one-in-100-year message from the Australian people that they should be backed aspiration,” Mr Morrison said.

“And Labor has been dragged kicking and screaming to the table on this issue and so the test is there for them today.”