Coalition and Labor tax plans compared as Australian federal election looms

[Mighty AU]

Income tax cuts are set to be a central issue in the election campaign, with Labor trumpeting bigger tax reductions for lower-income earners than the Coalition, and the Government boasting of its long-term tax cuts.

So what tax cuts are the two parties promising, when will you see them, and can the budget afford them?

Immediate tax cuts from both parties

In the short term, there is not a huge difference between the Coalition and Labor on income tax cuts.

Both are proposing to increase a tax offset for low- and middle-income earners. If eligible, you will receive it when you submit your tax return — so it will either be part of your refund or reduce any tax debt you owe the Australian Taxation Office (ATO).

In both cases, the tax offset will be backdated to the current financial year, so you will get it when you submit your next tax return some time after July 1 this year.

The main difference between the two is that Labor has now promised to ramp up the tax offset for 3.6 million people earning less than $48,000 a year.

Workers earning up to $37,000 would receive a $350 tax offset, which would then increase to a peak offset of $1,080 for people earning taxable incomes between $48,000 and $90,000, before gradually reducing to zero at a taxable income of $126,000.

The Government's low-income tax offset announced in its Budget starts at $255 and then ramps up in a similar fashion to the same maximum of $1,080 between $48,000 and $90,000.

What Budget 2019 means for you:

For those earning below $37,000 a year, Labor's announcement offers an extra tax cut of $1.83 per week over the Government — not even a short bus fare in Australia's biggest cities. But for the majority of workers, both parties' tax-cut plans are the same.

But don't think higher-income earners get nothing. Both parties are offering an increase in the 37 per cent tax-bracket threshold to $90,001 from $87,001 currently.

This means any dollar earned between $90,001 and $180,000 will now be taxed at 37 per cent, rather than every dollar between $87,001-$180,000 being taxed at this rate.

Combined with the middle-income tax offset, it will save someone on $90,000 a year taxable income $1,215 a year in tax, making them the biggest winners in dollar terms from either party's short-term tax plans, while people earning above $126,000 a year will save $135 per annum.

In short, the Opposition is essentially planning to retain stage one of the Government's already legislated tax cut plan, but to ramp up payments to low-income earners slightly.

Long-term differences in tax plans

But, while the two major parties' short-term tax plans are virtually identical, their long-term plans are poles apart.

https://www.abc.net.au/news/2019-04-05/tax-plans-compared-as-federal-election-looms/10973968

https://files.facepunch.com/forum/upload/226043/4b21c586-c8b1-4f15-a7a9-f6756c27c198/D16C70C8-FB40-46BE-81CB-3B61698FB003.png

Above graph is courtesy of ANU; more information in the article.

The federal government’s budget is projected to return to surplus this coming financial year, and the net debt is expected to be wiped out by 2029. In response to that stronger fiscal position, both Labor and the Coalition are promising tax cuts for low-middle income earners.

The Coalition also wants to implement tax cuts for higher income earners and invest $100 billion in infrastructure (including in regional areas and with potential investment in high speed rail) over the next 10 years. Frozen indexation of some Medicare benefits will also become unfrozen, so GP visits should be cheaper for people relying on the public healthcare system.

Labor on the otherhand are instead seeking to increase taxes on higher income earners, notably by not addressing bracket creep for the higher tax brackets (that’s why average tax increases over time, as demonstrated in that graph) but alao through changes to negative gearing and capital gains tax. I believe Labor are matching the Coalition’s spending increases and then some; eg Labor wants to invest more in care for cancer patients and cancer research.

Either way, average Australians can expect a pretty good deal regardless of whether Labor or the Coalition win the as-yet-unannounced election in May. However, there is concern that neither party are taking advantage of the projected budget surplus in a manner to properly secure the economy against future downturns. Eg wage growth is still mostly stagnant, due to the continued erosion of employee bargaining power in both union workplace and professional workplace settings.

[OfficerLamarr]

Glad to see Murdoch's empire is reporting about this in a non-biased and accurate way as always.

https://twitter.com/couriermail/status/1113086453184028672

[Mono]

It's honestly pathetic how clearly biased the media is in this country.

[Patrick]

and its more pathetic how uneducated people are in this country and will buy into it without second thought.

"all the newpapers are saying it, must be true!"

[🅱️🅰️LLS. ➿]

Labor are looking pretty good coming to the election, hopefully the rest of the general public agree