The $324 Billion Stage Three Tax Cuts Are Changing ... For the Better?

The Labor Government has voted to amend the Morrison Government’s stage three tax cuts to offer “substantial” cost of living relief to more people. 

Taxpayers earning less than $150,000 will be the biggest winners from the alterations to the tax cuts, which originally only stood to benefit Australia’s wealthiest.

The original tax cuts were brought in by the Morrison Government in 2019, with the support of Labor, to reduce the amount of tax many Australians paid by consolidating some tax brackets.

Australia currently has four income brackets that are all taxed at different rates, but these cuts were set to remove the $120,000 - $180,000 tax bracket and increase the top tax bracket to $200,000 so anyone earning between about $45,000 and $200,000 would owe the same tax rate of 30 per cent. This gives high-income earners $9,000 worth of tax breaks a year, which was heavily criticised by the Greens and equality advocates. 

But on Tuesday, the cabinet voted to approve a plan to retain the $120,000 to $180,000 bracket – undoing the most controversial part of the original cuts. The money the government saves from these changes will go towards a “substantial” cost-of-living relief package for low- and middle-income earners and extend the cuts to those earning between the tax-free threshold of $18,200 and $45,000, who were originally left out. 

Prime Minister Anthony Albanese announced at a press conference after the meeting that he was pro “tax cuts and everyone will be getting a tax cut”.

“We’re determined to follow the Treasury advice to provide assistance to [middle Australia],” he told reporters.

The Opposition and conservatives have already lashed out at Labor for breaking a 2022 election promise to keep the stage three tax cuts in place the way they were already legislated. 

Albanese said today the change wasn’t an easy decision but it was the right one because “a pandemic, a recession, global inflation, not one war but two wars have had an impact”.

“There [have] been considerable events. But I’ll be very clear accepting responsibility for policies put forward by my government,” he said.

“That’s my job. My job isn’t to say I’ll just wring my hands about cost of living pressures that people are feeling. My job is to respond … to make a difference, to make the right decision, not the easy decision.”

The stage three tax cuts are also infamous for their high price tag. Because the government makes money from our taxes, giving us tax cuts loses them revenue. The stage three tax cuts were last predicted to cost $313 billion over ten years – one of the most expensive policies in Australian history. These amendments will add a few billion to the bill, bringing the total to about $324 billion.

To put that in perspective, with that kind of money we could build hundreds of hospitals, make university free for all domestic students for 10 years, raise the Medicare levy by 50 per cent for 140 years, or just give every income-tax-paying Australian a one-off $20,000 handout.

Aleksandra Bliszczyk is the Deputy Editor of VICE Australia. Follow her on Instagram.

See more from Australia Today on vice.com and on TikTok.