Anthony Albanese insists a broken election promise on tax cuts is the right thing to do in changed economic circumstances, promising middle-income earners an extra $800 a year.
The prime minister will use a National Press Club address to outline his case for overhauling stage three tax cuts due to take effect in July.
In extracts distributed ahead of his speech, Albanese said the government was choosing a better way forward.
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“This is a plan for middle Australia that delivers for every Australian taxpayer, right up and down the income ladder,” he said.
Most workers will be better off than they would have been under the existing package, while the benefit for those on the highest incomes will be halved.
Under the changes, a person earning an average wage of $73,000 will get a tax cut of more than $1500 a year.
Those earning $50,000 will pocket an extra $929 a year while people on $100,000 will receive $2100.
Households on an average income of $130,000 will receive $2600.
At the upper end, the stage three tax cuts for those earning $200,000 will be slashed from $9075 to $4500.
Albanese will rely on Treasury advice to make the case for change.
When the stage three tax cuts were introduced by the coalition in 2018, the Australian economy was expected to be supported by strong global conditions.
Inflation and interest rates were expected to remain low.
“Unanticipated global events meant these projects have not come to pass,” Albanese said, quoting Treasury advice.
He cited the same advice to quash fears of putting pressure on inflation.
“This option is broadly revenue neutral, will not add to inflationary pressures and will support labour supply.”
The lowest rate on income tax will be reduced from 19 to 16 cents in the dollar, meaning workers will pay less on the first $45,000 they earn.
The low-income threshold at which the Medicare levy kicks in will also be increased.
The second tax rate will be reduced from 32.5 to 30 per cent for people earning up to $135,000.
Labor will retain the 37 per cent rate for people earning over $135,000 and the top tax rate of 45 per cent will kick in at $190,000 rather than $180,000.
Albanese said the tax cuts were “fairly and squarely focused on middle Australia”.
“Our government understands that middle income Australians need help with the cost of living now more than ever,” he said.
Labor MPs endorsed the tax package during a snap meeting on Wednesday, ahead of Albanese’s speech to open the political year.
The opposition has accused Albanese of breaking his word and engaging in class warfare.
Labor will roll out an ad campaign to explain the changes to Australian workers, with Albanese promising further relief.
“These broader and better tax cuts are not the beginning of our actions on cost of living – and they will not be the end,” he said.
Aussies tipped to benefit
Under the new tax cuts, a person earning:
- $50,000 will receive a tax cut worth $929 a year (up from $125)
- $73,000 will receive a tax cut worth more than $1500 a year (up from $750)
- $100,000 will receive a tax cut of more than $2100 a year (up from $1375)
- $200,000 will receive a tax cut of more than $4500 a year (down from $9075)
Lower and middle income earners will be better off, Albanese said, and high-income earners will still receive “substantial” relief.