Tweaks possible to tax cuts

AS Labor prepares to hand down its federal budget amid recessions in other countries, many people are focused on potential changes to the stage three tax cuts.

That is despite Prime Minister Anthony Albanese repeatedly saying he has no plans to dump the former government’s scheme.

Treasurer Jim Chalmers (pictured) said last week that the world was bracing for another global downturn and while the October 25 budget would not forecast a recession for Australia, the nation would not escape unscathed.

“We are in much better nick than most of the countries with which we compare ourselves but we won’t be immune from a global downturn,” he said.

“It will have implications for our own growth forecasts. It will have implications for our unemployment forecasts. That much is obvious and that much is clear.”

The stage three tax cuts, which are due to come into effect in July 2024, are part of the former Morrison government’s tax plan.

Legislation passed with Labor’s support in 2019 despite some concerns and Mr Albanese went to the 2022 election promising no changes.

But the tax cuts could still be tweaked.

Mr Chalmers has repeatedly noted global economic conditions have changed, including rising inflation and several interest rate hikes following the peak of the Covid-19 pandemic.

Stage three scraps the 37 per cent marginal tax bracket and lowers the 32.5 per cent marginal tax rate to 30 per cent. It also increases the threshold for the 45 per cent marginal tax rate, so people earning between $45,000 and $200,000 will pay the same 30 per cent tax rate.