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The stage three tax cuts are a taxation policy overseen by the Australian Government, scheduled to come into effect on 1 July 2024. Originally forming the third and last stage of the Turnbull government's personal income tax reforms, stage three was altered in the Morrison government's 2019 budget to include an additional A$90 billion of tax cuts.[1]
Stage three has been the subject of significant political discussion and controversy in Australian politics, and has been used as a wedge issue. During the 2022 Australian federal election campaign, the Coalition and Australian Labor Party both stated their full support for retaining stage three, whereas the Australian Greens and several independent MPs argued for its modification or abolition. In January 2024, the Albanese government announced modifications to stage three that reduced the overall cost and gave larger cuts to individuals earning under A$200,000.
The original suite of tax cuts were legislated by the Turnbull government as the Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018.[2] Stage three is scheduled to take effect on 1 July 2024.[3]
All three stages were part of the same legislation, with Treasurer Scott Morrison stating this was done to provide "certainty".[4]
Following amendments, the final legislation passed the House of Representatives with the support of the Coalition, Bob Katter and independent MP Julia Banks.[5] The bill was opposed by Labor, the Greens and two independents; Cathy McGowan and Andrew Wilkie.[5]
In the lead-up to the 2019 federal election, Labor made a number of criticisms of stage three. Shadow treasurer Chris Bowen stated in April 2019 that it was "neither fair nor responsible to lock in billions of dollars of tax giveaways that disproportionately benefit a relative few - and so far into the future”.[6] Shadow finance minister Jim Chalmers stated that "the last stage of tax cuts can only be funded by budget cuts".[7]
Following the Morrison government's victory at the federal election on 18 May, treasurer Josh Frydenberg handed down his budget. In it, the stage three tax cuts were modified to cut taxes by a further A$90 billion.[1] This change brought the total cost of stage three to A$254 billion over the 2024-2034 period.[1]
The legislation was passed on 4 July 2019, and was entitled "Treasury Laws Amendment (Tax Relief so Working Australians Keep More of Their Money)".[8][9] Opposition leader Anthony Albanese unsuccessfully proposed amending the name of the bill to "Treasury Laws Amendment (Tax Relief So Working Australians Keep More of Their Money But Not For a Really Long Time)."[9]
Labor voted for the A$158 billion dollar tax plan in both chambers of parliament, but leader Anthony Albanese stated that they had done so as not to block the earlier stages from benefiting "working Australians".[10] In the Senate, the legislation was supported by the Coalition, Labor, Jacqui Lambie and the Centre Alliance, and was opposed by the Greens.[8] Labor unsuccessfully proposed amending the legislation to delay stage three and bring stage two of the tax cuts forward.[8]
In September 2020, The Australia Institute published a report stating that the majority of the stage two and three cuts would benefit the top 10% of earners.[11]
In July 2021, the Labor party held a party room meeting where they decided that if they formed government, they would retain stage three.[12]
After becoming Prime Minister, Anthony Albanese ruled out altering or abolishing stage three.[13]
In August 2022, federal crossbenchers voiced their opposition to stage three. David Pocock, Jacqui Lambie, Dai Le, Monique Ryan, Bob Katter and Andrew Wilkie stated that stage three should be abandoned, and Rebekha Sharkie stated that the timing of stage three "should be reconsidered".[14] Pauline Hanson stated her support for stage three being implemented.[14]
In the same month, the Parliamentary Budget Office released a report, commissioned by the Australian Greens. The report stated that stage three would provide around twice as much benefit to men as to women, and that 48% of the benefits of stage three would go to those earning above A$180,000.[15]
In October 2022, former Prime Minister Malcolm Turnbull stated that he did not believe the cuts should be implemented, due to their cost, and that Labor had made a mistake by committing to implement them at the 2022 federal election.[16]
Independent members of the Australian Parliament advocated for restructuring of stage three, including Dai Le, David Pocock and Monique Ryan.[17]
In January, the Albanese government announced changes to the stage three tax cuts. The changes mean that individuals earning between A$45,000 to A$150,000 will pay A$804 less tax compared to the previous stage three plan. For those earning over A$200,000, the cut is reduced by half.[18]
Response to changes
Coalition
The Coalition has accused Albanese and the government of lying and breaking an election promise by changing aspects of stage three. Deputy Liberal leader Sussan Ley stated that Labor "lied about these tax cuts",[19] and shadow Treasurer Angus Taylor stated that the decision was "the mother of all broken promises”.[20]
Initially, several figures in the Coalition suggested that they would oppose the government's changes. On 23 January, Taylor stated that the Coalition would "absolutely not" support any changes to the tax cuts.[21] On 25 January, Ley stated that the Coalition's position was to "support the existing stage three arrangements",[19] and opposition leader Peter Dutton stated that the changes were significant enough that the government should hold an election to get a mandate for them.[22] On 26 January, Dutton stated that the Coalition was wanting to "understand the costings" before making a decision about supporting the changes.[23]
On 6 February 2024, the Coalition announced that they would support the government's amended legislation in Parliament.[24] The legislation passed through the House of Representatives on 15 February, and passed through the Senate in an evening sitting of 27 February.[25][26]
Greens
Greens leader Adam Bandt stated on 26 January 2024 that the changes to stage three were not sufficient for assisting low- and middle-income earners.[27]
A poll conducted by The Australia Institute in September 2022 found that 41 percent of respondents supported a repeal of the stage three tax cuts, while 22 percent were opposed.[28] Another poll by the Australia Institute in October 2023 found that in a cohort of voters informed of the cost to the budget and who benefitted from the tax cuts, 25% of respondents supported repealing the tax cuts, and 44% stated they should be restructured.[29] 17% were in favour of retaining stage three in an unchanged form.[29]
After the Albanese government announced changes to the tax cuts in January 2024, a poll by Newspoll found that 62 percent of those surveyed were supportive of the changes.[30]
Polling by the Australia institute in the Division of Dunkley in the lead-up to the 2024 Dunkley by-election found that 66% of residents surveyed supported the government's changes to stage three.[31]
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