A senior Labor figure has blasted the Albanese government for failing to hand back bigger tax cuts to income earners, as the Prime Minister and senior colleagues face mounting criticism over broken election promises announced in last week’s Budget.
On Wednesday New South Wales Premier Chris Minns said income-earners paying the highest marginal tax rate of 47 per cent were effectively working half the week for the Federal Government and demanded more action to combat bracket creep.
Just days after Opposition Leader Angus Taylor’s post-Budget pledge to end the “inflation tax”, the Premier of Australia’s most populous state declared families were being “stung” as pay rises pushed workers into higher tax brackets.
“Whether it’s in this Budget or it’s in the future, we do need to make sure that we’re doing everything we can to give more money back to working Australians,” he told reporters in Sydney.
“The top marginal rate is 47 per cent. As I said in parliament last week, you work Monday, Tuesday, and half Wednesday for yourself, and then Wednesday, Thursday, and Friday for the government, that’s a tough burden for a lot of families to hit.”
Bracket creep occurs when inflation and pay rises push workers into the next tax bracket, meaning any financial gains are offset by higher taxes.
Premier Minns also warned that improved wage agreements from his state government for nurses, paramedics and teachers were being undermined by growing Commonwealth tax burdens.
“In a general sense, whether it’s now or in the future, we do need to make sure we’re taking urgent action when it comes to personal income taxes because at the moment, a lot of working families are getting stung.”
When later asked if he thought the top marginal tax threshold was too low, Federal Treasurer Jim Chalmers took a veiled swipe at his New South Wales Labor colleague.
“Well, first of all, we have increased the top (rate) in the tax system. We did that a couple of budgets ago,” Dr Chalmers said.
“Secondly, we do understand how important it is that bracket creep be returned, and that’s why we’ve done it five different times in three different ways.
“This is a government that cuts income taxes, we’ve done that enthusiastically and we’ve done that repeatedly. We’ve increased the thresholds, we’ve cut the rates, we’ve provided tax relief via a standard deduction and via a working Australian tax offset.”
Under Australia’s progressive tax system those on incomes up to $18,200 pay no tax under the tax-free threshold, while those earning between $18,201 and $45,000 are taxed at 16 per cent.
Earnings between $45,001 and $135,000 are taxed at 30 per cent, income from $135,001 to $190,000 is taxed at 37 per cent, while any income above $190,000 is taxed at 45 per cent.
The Morrison government legislated for the top marginal tax threshold to be increased from $180,000 to $200,000, but the Albanese government reduced it to $190,000 in 2023 after winning office, while keeping the existing 45 per cent tax rate.
Under the Coalition’s indexation plan unveiled last week, the bottom two income tax brackets would be automatically adjusted for inflation from 2028–29, with the top two brackets to follow from 2031–32.
The Prime Minister and a team of ministers spent much of Wednesday morning trying to discredit a viral social media campaign claiming the Albanese government is imposing a 47 percent tax on start-ups and small businesses.
Speaking on radio before flying out of Perth, Anthony Albanese described his government’s Budget tax changes as “having more fairness in the system for the overwhelming majority of people”. “You need a fair tax system as well that doesn’t allow someone who’s a nurse working their guts out, making a difference, trying to save for a home, trying to get by on, you know, not a very high wage, but they’re paying more tax than someone who is able to use vehicles to minimise their tax completely.”
Appearing on talkback radio Labor’s Andrew Charlton, who as Cabinet secretary sits in on all pre-Budget discussions, described online memes attacking last week’s capital gains tax changes as “factually incorrect”.
Taking questions from callers, the assistant minister for the digital economy acknowledged that start-ups are good for the economy and that founders take risks in pursuing their big ideas.
“However, the claims and memes that are floating around on the internet are just factually incorrect,” Mr Charlton told the ABC.
“We are not increasing the tax rate for those people in any way. They were already paying their top marginal tax rate on the capital gain in the old regime.”
“If they sold their business, they were paying their top marginal rate, their marginal rate on the capital gain. It’s just that, that capital gain was being reduced by 50 per cent and then their marginal rate was applied to it.
“What’s going to happen now is actually quite similar, but they’re still going to pay the exact same rate, but instead of their capital gain being reduced by 50 per cent, the capital gain is going to be reduced by something else, and that is by the rate of inflation … over the life of that investment
“Now, whether that is more or less will depend on the circumstances of the individual and the business, but it is absolutely not true to say that we are somehow increasing tax to 40 per cent, 47 per cent on entrepreneurs or small businesses already paying their marginal rate.”
As senior Albanese government figures continue to defend broken election promises on negative gearing and capital gains tax, Nationals leader Matt Canavan has demanded the prime minister call a fresh election to test support for the controversial measures.
Speaking alongside Liberal Leader Angus Taylor in Queensland, Senator Canavan said any increase in the capital gains tax in this term of the Albanese government was a broken promise.
“He’s changed his mind on capital gains tax, well, he should give the Australian people the chance to change their mind and have another election, and he’s probably not going to do that.
“I reckon he should. He probably won’t, because he’d be worried about the reaction at an election.”
Appearing at the National Press Club on Wednesday, Liberal frontbencher Tim Wilson was asked whether he shared Senator Canavan’s “death wish” to go to an election now given the Coalition is polling below One Nation.
The shadow treasurer responded that the opposition needed to approach the next election as “confident Liberals with the clearest vision about where we want to take the country”.
“I’ve outlined today very clearly that we are here to back the self-starters of this country to get ahead. So Matt’s (Canavan) right. The prime minister has utterly betrayed the Australian community,” he said.
In early 2024 then opposition leader Peter Dutton also demanded Anthony Albanese call an election to win a fresh mandate for Labor’s revamped income tax plan because it was a “significant change” to stage-three cuts that favoured high-income earners.
Meanwhile the Teal politician who represents the wealthy Sydney electorate of Wentworth has admitted she “probably” underestimated concerns about how capital gains tax (CGT) changes in the Budget would affect the startup sector.
Two months before the Albanese government announced it would introduce a minimum 30 per cent tax on gains, independent MP Allegra Spender released a white paper which advocated the same move.
Following a backlash from entrepreneurs to axing the 50 per cent CGT discount, Ms Spender says she now thinks a reduction to 40 per cent would be more reasonable.
“I think that the Henry Review recommended a 40 per cent … discount on CGT,” Ms Spender told the ABC.
“I think, in retrospect, looking at my own proposal, I think that’s a more reasonable level, and so that’s personally where I think that would be a reasonable level at the CGT”.
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