Tax change architects

Proposal came from public servants, not politicians

The Treasurer did not ask public servants to overhaul the stage 3 tax cuts, rather the department came up with the idea, an inquiry into cost-ofliving has been told.

Senior public servants from the departments of Treasury and finance were on Monday grilled over the timeline of the Albanese Government’s contentious changes to the legislated stage 3 tax cuts.

Although internal Labor polling suggests most Australians are happy with the revised plan, which delivers tax cuts to low- and middle-income Australians at the expense of higher-income earners, Anthony Albanese has borne the brunt of backlash over his “broken promise” to deliver the original plan in full.

The Prime Minister has maintained that the changes reflected the economic climate and were the best method to dole out cost-of-living relief without adding to inflation, as recommended by Treasury.

Public servants backed those claims under grilling from opposition finance spokeswoman Jane Hume.

Treasury deputy secretary for revenue Diane Brown said Jim Chalmers had first asked secretary Steven Kennedy to consider further cost-of-living measures in mid-December.

Ms Brown said Dr Kennedy had “been thinking about how to provide cost-of-living relief in a way that didn’t add to inflationary pressures”.

“He (Dr Kennedy) was interested and had mentioned to us around roughly the same time that he would like the department to think about whether adjusting the personal income tax rates and thresholds could provide broadbased relief to all taxpayers in a way that didn’t add inflation,” she said.

“We were concerned that bracket creep would still be returned and so the envelope for returning bracket creep was roughly the same.”

The department handed their research to the Treasurer on January 20; cabinet considered, and adopted, the changes on January 23 and Mr Albanese announced the changes a day later.

Senator Hume put to Ms Brown that the process had been rushed and Mr Albanese had lied to Australians and potentially implicated the department in the process.

Ms Brown said that was not the case.

When Senator Hume noted Mr Albanese had maintained the government’s position on stage 3 “had not changed” just days before Treasury began looking at cost of living, Ms Brown said it had not been the government’s idea to change the tax cuts.

She said the department was prepared for its advice to not be listened to.

“The department decided that the best way to do that would be through changing personal rates and thresholds,” Ms Brown said. She also confirmed that the RBA was consulted on whether the proposal was inflationary.