The Australian Institute think tank produced a new model of the coalition's new tax plan, suggesting high-income earners will benefit from the new tax cuts the most. The final stages of the Turnbull government’s new tax plan will flatten the Australian tax scale, providing the biggest help to Australia’s top 20%.
The new tax plan was designed to be implemented over a period of 7 years in three stages
The first stage will target the 48,000-90,000 income group and will provide a tax offset of up to $530 for the group. According to the Guardian, the Australia Institute's model shows that part two and three of the plan “will increase the 32.5-cent-in-the-dollar income tax threshold from $90,000 to $200,000 and eventually abolish the 37-cent tax bracket from mid-2024”, as a result flattening the tax income scale. The first stage of the plan seems to have enough support to pass the senate. Labour and other crossbenchers are questioning the two later stages.
The model shows that the top 20% of high-income earners will receive 80% of the benefits from the tax cuts in the final two stages. The model also shows that the next 20% will receive the remaining of the benefits, meaning up to 60% of the remaining taxpayers will receive no benefit at all. According to the Australian institute’s modelling, “the top 20% of taxpayers will have a tax cut of $12.7bn, while the next 20% will get the remaining tax cuts, worth $3.3bn.”
Labour, Greens, and One Nation to oppose plan
Bill Shorten has announced Labour’s alternative income tax policy in his budget reply speech, which will almost double Coalition tax cuts in a pledge to “go further and do better” for low and mid income earners. Shorten also took a hard stance against Liberal’s plan to flatten the tax income scale saying, “Very quickly, this is looking like another mates’ rates tax plan from the Liberal party.”
Richard Di Natale has announced that the Greens will not support either plan. Di Natale feels both plans will worsen inequality and does not “address the tax avoidance system that’s allowing multinational companies to avoid paying a fair share of tax in Australia.”
Also announced as part of the new budget, Turnbull’s government wants to cut corporate tax by 5 - 25% for those earning over 50 million a year. Senate will vote on this corporate tax in June.
In a turn of events, One Nation has reversed their position and pulled their support on the corporate tax cut, choosing to support only the first 2 steps of the tax plan; in a move Pauline Hanson is calling their “final decision”. One Nation senator Brian Burston is however set to defy Hanson and his party by siding with the Turnbull government and voting for the entire 7-year tax plan. Senator Burston’s defiance does give the government hope that they can pass the tax plan, which would otherwise be doomed without the minor party’s crucial 3 votes. Finance Minister, Mathias Cormann, says the package will go to senate unchanged. The minister also vowed to continue negotiations with the crossbench and to take the company tax cuts to the next election if blocked.