Budget measures worth $51.4 billion are set to clear Parliament in a bipartisan deal to enact sweeping personal tax cuts and business incentives in a bid to deliver a swift economic gain.
Workers will see the income tax cuts reflected in their salaries by Christmas after Labor gave the Australian Tax Office a formal assurance that it backed the $17.8 billion package, ensuring it would sail through Parliament.
Labor is also ready to support a $26.7 billion company tax break to allow employers to claim a full deduction on capital assets they purchase before June, the centrepiece of the budget plan to spur investment.
The bipartisan support also clears the way for a $4.8 billion measure to let companies carry back tax losses, a $2 billion commitment on research and development and a $105 million boost for small business.
In a contrast with the long political fights over previous budgets, Labor leader Anthony Albanese and his shadow cabinet gave the priority measures their support in principle ahead of his budget reply speech on Thursday night.
Treasurer Josh Frydenberg defended the record budget spending despite criticism of a budget that will take Commonwealth gross debt to $1.7 trillion by 2031 after another decade of deficits.
Labor treasury spokesman Jim Chalmers moved to ensure the $17.8 billion income tax cuts took effect as soon as possible, writing a formal letter to the Australian Tax Office to back the plan.
Tax officials have begun work on the schedules in order to implement them this month, but they expect pay offices to take a further six to eight weeks to apply the changes to salaries.
« I am writing to confirm Labor’s support for the government’s announced amendments to bring forward stage two of its personal income tax plan to apply for the 2020-21 income year alongside the low and middle income tax offset [LMITO], » Mr Chalmers wrote.
« I note that you require public bipartisan support for these amendments to be able to implement the updated tax withholding schedules prior to the passage of amendments through Parliament. »
The ATO, having been assured of the bipartisan support, issued a statement on Wednesday saying it was ready to apply the changes to pay-as-you-go income tax and would work with providers of payroll software.
« Employers may need a short time to make the changes in their payroll processes and systems in order for the tax cuts to be reflected in people’s take home pay, » it said.
« It is not possible for the ATO to determine the extent of ‘over-withholding’ that may have occurred for each and every taxpayer as this is highly dependent on individual circumstances and will be different for everyone. »
The income tax changes comprise two main elements. The first is an extension of the LMITO, a one-off tax offset which is worth $1080 to those earning from $50,000 and $90,000, with a smaller benefit for people earning above and below those amounts.
Tax officials confirmed on Wednesday that workers would have to wait until the end of this financial year to receive the LMITO after they lodge their tax returns.
The second element of the package is an increase in the threshold for the 19 per cent tax bracket, which rises from $37,000 to $45,000, and an increase in the threshold for the 32.5 per cent tax bracket, which rises from $90,000 to $120,000.
This delivers greater benefits to workers on higher incomes and, unlike the LMITO, will be reflected in pay packets by Christmas.
The government argued many workers would benefit from tax cuts in three waves: a LMITO paid for the tax year just finished, the reduction seen in their PAYG by Christmas and the LMITO they would receive at the end of this financial year.
Treasury secretary Steven Kennedy said this meant workers knew they would be receiving some form of refund at the end of the financial year.
« Ideally, because this is a low and middle income group, we should see quite a lot of spending out of this group. It was deliberately designed for that, » he told journalists at the National Press Club on Wednesday.
Industry groups applauded the budget on Wednesday while unions and community groups called for more support for workers and the unemployed and few issued any concern over forecasts for deficits every year to at least 2030.
The Institute of Public Affairs, however, said the cost of gross debt, which peaks at $1.7 trillion in 2031, would last for « generations ».
While the Labor caucus is yet to vote on the omnibus budget bill introduced to Parliament on Wednesday, senior figures said they were comfortable with the main budget measures in principle but would subject them to scrutiny in Parliament.
The concerns include making sure the $26.7 billion business incentive works properly given its significant cost, and making sure the research and development plan works after the government backflipped on earlier plans to cut R&D tax incentives.
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Actu monde – AU – Tax cuts to flow within weeks after ATO receives assurance of Labor’s support