Tax returns: Millions ready for massive tax cuts, benefiting top earners the most

Huge tax cuts are coming and a group of Australians will be the biggest winners. Here’s everything you need to know.

Despite a crushing rise in the cost of living, it will be the wealthy Australians who will get the biggest tax break, as Anthony Albanese pledged to push ahead with tax cuts that disproportionately benefit high earners.

The prime minister warned of pain as he admitted the government will have to put a strict limit on spending when it hands over its first budget, while also honoring Labor’s election pledges.

But by far the bulk of the spending, the third-phase tax cuts, which will cost a dazzling $15 billion a year and benefit well-earned Australians, will be honoured.

Mr Albanese said Labor will continue to implement the already legislated income tax cuts in 2024, which will create a flat rate of 30 percent for those earning between $45,000 and $200,000.

Australians who earn more than $120,000 and are now taxed at 37 percent will benefit the most, with workers earning $90,000 a year and saving $1,125 and those with $200,000 over $9000 are better off.

Talk about 7.30 on the ABC on Thursday, Mr. Albanese confirmed that another federal budget will be issued on October 25, 2022, just months after Scott Morrison’s government submitted a budget in March.

Mr Albanese also warned of some difficult decisions in the October budget.

“We’re really going to have to put a brake on some of the spending that’s out there,” he said. “There are some things we would like to do that we can’t do in our first budget.

“We will also go through line by line, looking at the waste that is there, and we have already identified a series of measures taken by the former government that are frankly wrong.”

He said election pledges such as cheaper childcare, the creation of Jobs and Skills Australia and climate change would be met, as would the tax cuts for high earners.

Professor Ben Phillips, an expert on welfare and cost of living at the Australian National University, said the cost of the tax cuts dwarfs the cost of key Labour’s pledges and benefits a group of Australians who are already good for themselves.

“These cuts are blowing everything else out of the water in terms of cost, so that’s where the biggest problem will come when it comes to balancing the books,” he said. “They could instead provide more help to low-income areas like job seekers recipients — that’s where the help should be targeted, because middle and upper-income earners are doing well.”

Unemployed Australians who receive Centrelink payments will not get extra money after Labor scraps its plans to review the percentage of job seekers. A single person currently earns $642.70 every two weeks or $46 a day.

However, Mr Albanian defended the tax cuts for the rich and said they had already been approved.

“They are legislated, and one of the things people have a right to believe is that when a politician makes a commitment to an election, he keeps it, and I intend to do that,” said Mr. Albanian.

“What we also need is certainty. People have made assessments based on the certainty that comes from regulatory tax changes, and we intend to comply.”

Millions benefit from increase in minimum wage

However, millions of low-earning Australians will benefit from an increase to the minimum wage.

About 2.7 million minimum-wage and low-paid workers with awards will receive a raise to 5.2 percent — the most generous in 16 years.

Beginning July 1, the lowest paid will receive $812.60 per week, up $40, and $21.38 per hour, up $1.05.

Labor will also honor the abolition of the low and middle income tax.

Income earners up to $126,000 have received lower and middle income taxes worth $1080 per year each fiscal year since 2018-19.

The compensation was supposed to end when the phase two tax cuts went into effect, but was extended for another two years after the cuts were pushed forward to 2020 due to the pandemic.

The end of the rebate means that Aussies earning up to $126,000 will pay up to $1,500 more in income tax in 2023 than this year.

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