Taxing times on horizon

Labor’s plan has late sting in the tail

A WORKER on less than $100,000 a year now would pay nearly $1000 extra tax in 2022-23 under Labor compared with the Coalition’s “more sensible” plan, top social researchers say.

Bill Shorten plans to pick your pocket by failing to match Scott Morrison’s latest vow to further lower taxes and undoing the cuts the Coalition successfully passed into law last year.

A person making $99,000 this financial year could pay an additional $1440 in tax under Labor in 2022-23 when their earnings would be about $110,000, based on conservative wage growth estimates.

Labor would then give them back $480 via the “Lower and Middle Income Tax Offset”, or LMITO.

That would leave the worker $960 a year worse off overall, according to analysis by the Australian National University prepared exclusively for News Corp Australia.

A couple currently earning a combined $180,000 — where one is working part-time — would be nearly $2500 in the red under Labor in 2022-23 by which time their household income would have risen to about $200,000 annually.

The results also show a person on $40,000 in four financial years would be better off under the Coalition.

Asked to summarise the parties’ medium-term plans, ANU Centre for Social Research and Methods’ top analyst Ben Phillips said: “Certainly the Coalition’s is a little more sensible.”

This was because the Coalition was tackling bracket creep by increasing the income levels at which higher tax rates were payable while Labor was not.

Associate Prof Phillips, whose team prepared the tax plans comparison, said the LMITO — which the Coalition would end by 2022-23 but Labor would keep — was adding complexity to the system.

It was better to provide regular relief through tax cuts that increased every pay packet than to deliver a one-off refund after the end of the financial year, Prof Phillips said.

The ANU analysis is based on the latest plans laid out by the Government and Labor.

The Coalition wants to deepen cuts it had passed into law last year.

Labor has decided to oppose the additional relief — and recommitted to reversing already-legislated reductions.

Starting 2022-23, the Coalition would shift the starting point of the 19 per cent tax threshold to $45,000 from $41,000; Labor wants to reduce it to $37,000.

A Morrison government would set the 37 per cent bracket to begin at $120,000; Mr Shorten would have it at $90,000.

H&R Block tax communications director Mark Chapman said that in contrast to most recent election campaigns, there was a stark difference in medium-term tax plans. But more immediately, there was little to separate the parties.

Both are offering kickers in 2018-19 to 2021-22 tax returns of as much as $1080.

Labor is pitching slightly larger refunds to those on less than $48,000, but is also planning to take 2 per cent of income above $180,000, costing a $200,000 earner $400 annually until 2022.

“With the short-term stuff, there’s virtually no difference between the two,” Mr Chapman said.

The Coalition is vowing to further reduce taxes from 2024-25 for anyone earning $45,000 a year and up by reducing the 32.5 per cent tax threshold to 30 per cent.

“That’s definitely going to be appealing,” said H&R Block tax communications director Mark Chapman. “It will have a real impact on middle-income earners.”

But, Mr Chapman said, voters would be sceptical about the likelihood of that change becoming a reality given it was more than five years off.