Prime Minister Anthony Albanese has officially unveiled the changes his government will make to the upcoming Stage 3 tax cuts, saying the changes will benefit parents with young children and “boost the family budgets of middle Australia”.
The Stage 3 tax cuts, which were originally legislated by the Morrison government in 2019 and are due to come into effect in July, will undergo some significant changes under the new plan.
Under the new plan, the government will reduce the lowest rate of income tax from 19 cents in the dollar down to 16 cents and will include those earning less than $45,000 a year in the Stage 3 changes. Previously, these taxpayers were not included. It also means everyone will pay less tax on their first $45,000.
“This is a significant boost for the take home pay of Australians of modest incomes and for the many Australians who work part time,” Albanese said at the National Press Club.
Albanese explained that an early childhood educator, aged care worker or cleaner earning $50,000 will now receive a tax cut of over $900 a year. He also proposed that women with young children will be among the key beneficiaries of the changes.
“These tax cuts will provide meaningful help for parents returning to work, particularly women with young children. Because one of the things that we know is that when women with children are making decisions about how many hours an increase in their take home pay is a powerful incentive,” he said.
“And this is where our broad and fair tax cuts are better for workers and also deliver for business by increasing workforce participation.”
In other changes, the second tax rate will be reduced from 32.5 per cent to 30 per cent and it will apply to incomes up to $135,000. The 37 per cent tax rate will be retained (it was to be scrapped under Morrison’s plan) and will apply to those earning $135,000 to$190,000. Meanwhile, the 45 per cent tax rate will start from $190,000, up from $180,000 (but lower than the $200,000 proposed under Morrison’s plan).
Albanese said the plan “delivers a tax cut for every taxpayer and more help for middle Australia, more help for families under pressure with their cost of living and a better deal for 5.8 million working women”.
“Every woman taxpayer will get a tax cut and 90 per cent will receive a bigger tax cut under our plan.”
Albanese explained the average wage earner in Australia, on $73,000 per year, will get a tax cut of more than $1,500, more than double what they would have received under the previous plan. Meanwhile, a worker earning $100,000 a year will get a tax cut of over $2,100.
“Over $800 more for the middle income earners because of our changes,” Albanese said.
“A family on the average household income, which is around $130,000, with one partner that is on $80,000 and the other on $50,000…That combined tax cut will be over $2,600.”
How will women benefit from the changes?
According to analysis from the McKell Institute, the new changes to the Stage 3 cuts, particularly its inclusion of those on less than $45,000, will mostly benefit women. Women account for 63 per cent of workers earning less than $45,000 and they would have missed out under Morrison’s initial plan.
“If the parliament adjusts the Stage Three package to include those making less than $45,000 a year it could make a significant difference to the lives of low-income workers,” Edward Cavanough, CEO of the McKell Institute.
“Given the cost of living crisis, and its disproportionate impact on women, including those on less than $45,000 a year could make a very significant social difference.”
Sam Mostyn, Chair of the Women’s Economic Equality Taskforce, noted that the taskforce had recommended gender analysis of tax and that the changes would benefit women.
“The Womens Economic Equality Taskforce recommended gender analysis of Australian tax & transfers system,” she said in a post to X. “@Treasury_AU analysis of redesigned stage 3 tax cuts shows the important benefit to women in these changes. Very good for women & our economy.”