It appears that employees and employers could reap the benefits of Tuesday’s budget by Christmas, after Labor formally confirmed to the Tax Office it will back the government’s individual tax cuts. Moreover, in the days since the budget, Labor has provided assurance that it is inclined to support the other budget measures aimed at the COVID-19 economic recovery.
In a statement issued late on Wednesday, the Australian Taxation Office (ATO) confirmed that the Treasury Laws Amendment Bill 2020, containing the amendments to bring forward the announced tax cuts worth $17.8 billion, has received bipartisan support.
Labor has also said it is “inclined” to support what’s been called the budget “game changer”, the $26.7 billion temporary full expensing, which will allow businesses to write off the full value of assets acquired after Tuesday night and first used by mid-2022.
The shadow treasurer, Jim Chalmers, said ahead of Labor leader Anthony Albanese’s reply speech on Thursday that the party would examine the details of this measure to “make sure that’s the right and responsible way to spend so much money”.
The bipartisan support also paves the way for the $4.8 billion measure that will allow businesses doing it tough as a result of the coronavirus to crawl back some of the tax paid on last year’s profits, as well as the additional $2 billion investment in the research and development tax incentive. Also included in the omnibus bill are 10 small business tax concessions.
However, personal income tax cuts have received definite backing, with Jim Chalmers delivering a formal letter to the ATO to back the plan.
Speaking of the tax cuts on Wednesday, Mr Chalmers said: “Today, I’m writing to the Tax Commissioner to indicate formally from the Albanese Labor Opposition that we fully support the bring-forward of Stage Two and the associated changes to the low and middle income tax offset, the LMITO.
“We’ve written to the Tax Commissioner to say that we fully support that bring-forward. There is no reason for the Tax Commissioner not to immediately implement the new scales which are agreed between the two big parties in the Parliament.”
When enacted, the tax cutting measures will see the LMITO extended, meaning a one-off tax offset worth $1,080 to those earning from $50,000 to $90,000.
The second part of the package will see the top threshold of the 19 per cent personal income tax bracket lifted from $37,000 to $45,000, while the top threshold of the 32.5 per cent personal income tax bracket will rise from $90,000 to $120,000.
Speaking to media on Wednesday, Treasurer Frydenberg said that taxpayers should see these tax cuts by Christmas.
“What the Tax Office has told us is that they’re going to amend the PAYG withholding tax schedules and that will be once we know that the Labor Party is supporting this bill, and the bill I’m introducing tomorrow. So, that will be from December or November onwards, so before Christmas,” Mr Frydenberg acknowledged.
“Those changes will be made and the first six months will be provided at the end of the year together with a low and middle income tax offset.”
According to the government, this acceleration will pump $12.5 billion into the economy in this financial year alone and will provide around 11.6 million individuals with a tax cut in 2020–21, compared with 2017–18 settings.
The Treasury also estimates that the income tax relief will create an additional 50,000 jobs by the end of 2021–22.