Laying out the details of the revamped stage three tax cuts at a national address, Prime Minister Anthony Albanese defended the change in policy as the “right thing to do”.
“When economic circumstances change, the right thing to do is change your economic policy,” Mr Albanese said at the National Press Club address on Thursday.
“This is a change in our policy.”
The prime minister repeatedly promised to deliver the stage three cuts in full as devised five years ago under the coalition government.
All taxpayers will pay less under the changes and 90 per cent will get a bigger cut than promised under the original scheme, although 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.
At the upper end, the stage three tax cuts for those earning $200,000 will be slashed from $9075 to $4500.
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,” Mr Albanese said, quoting Treasury advice.
He said a global pandemic, a recession, disrupted supply chains, conflicts and rising inflation, and global uncertainty had changed the game.
“And if we were to simply proceed with the old plan – promoted before any of these challenges even existed it would mean middle Australia missing out on the help they need and they deserve.”
He also quashed fears the rejigged tax plan would put pressure on consumer prices, with Treasury and the Reserve Bank expecting a broadly neutral impact on inflation .
But the opposition has accused Mr Albanese of breaking his word and engaging in class warfare.
“A more generous tax cut for one Australian should not come at the expense of what another Australian was promised,” Deputy Opposition Leader Sussan Ley told ABC radio on Thursday.
Ms Ley also said tax brackets should not be used to address cyclical challenges, such as the cost of living crisis, as they would remain in place for several years.
Under the Labor government’s rejigged scheme, the lowest rate on income tax will be dropped 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.