Stage 3 tax cuts rejig sails through parliament with relief set from July 1

Labor’s overhauled stage 3 tax cuts have sailed through the parliament, guaranteeing taxpayers additional relief come July 1.

After a vote was called in the Senate on Tuesday evening, the Coalition begrudgingly supported the government’s tax overhaul that will mean all of Australia’s 13.6 million taxpayers will receive tax relief from the middle of the year.

At a press conference following the passage of the tax package, Anthony Albanese hailed the change as a “huge win” for Australian workers.

“Australians are earning more and they will get to keep more of what they earn,” the Prime Minister said.

Mr Albanese, who sustained significant criticism from the Coalition over his backflip on the policy, then took aim at the opposition over their response.

“When this was announced, first (the Coalition) said they would oppose it, then they said they would fight it, then they said they would roll it back, then Peter Dutton called for a federal election on this policy before they voted for it,” he said.

Prior to the final vote, opposition finance spokeswoman Jane Hume told the Senate that the Coalition would not oppose tax relief for Australians.

“But that doesn’t mean we condone the mistruth that was told,” Senator Hume said, pointing to the government’s broken promise in altering the tax package.

On a victory lap early on Wednesday, Mr Albanese said Australians would have to “wait and see” what tax proposal the Liberals put forward head of next year’s election but stood firm that his reworked scheme would benefit more households.

“This is about a tax cut for all 13.6 million taxpayers. It’s a good day that they’re not going to miss out,” he said.

“We know that families are under cost-of-living pressure.

“The idea that we could sit back and ignore the clear recommendations that this was the best way that we could have an impact on providing that assistance to middle Australia without putting upward pressure on inflation, we couldn’t ignore that.”

The Albanese government’s rejig of the stage 3 tax cuts retains the tax-free threshold at its current rate of $19,200, lowers the rate on income earned up to $45,000 to 16 per cent – down from 19 per cent – and lowers the rate of the $45,000 to $135,000 tax bracket to 30 per cent – down from 32.5 per cent.

Additionally, the 37 per cent tax bracket will be retained between $135,000 and $190,000, after which the top marginal tax rate will then kick in at $190,000 at a 45 per cent rate.

About 11 million taxpayers earning up to $146,486 will pay less tax than they would have under changes to the original package.

The overhaul usurps tax changes, introduced by the then Morrison government in 2019, which would have created a single tax bracket between $45,000 and $180,000 at a rate of 30 per cent.

Despite offering additional relief to taxpayers under pressure from elevated interest rates and still-high inflation, Mr Albanese has failed to gain further support in opinion polls according to Newspoll and Resolve surveys.

The Coalition has vowed to develop a tax reform package ahead of the next federal election, due by May 2025 at the latest, which would be “in keeping with the stage 3 tax cuts”.

The Bill’s passing comes just days before the crucial Dunkley by-election, which will be a litmus test of middle Australia under pressure from cost-of-living pressures.

Mr Albanese and Mr Dutton have both played down their chances of electoral success in Saturday’s by-election.

The seat, on the Mornington Peninsula southeast of Melbourne, was vacated after the death of former Labor member Peta Murphy in early December.

At Saturday’s poll, Mr Albanese’s pick, community leader and schoolteacher Jodie Beylea, will face off against three-time Frankston City Council Mayor Nathan Conroy, who is the Liberal Party’s candidate.

Speaking to their respective parliamentary party rooms on Tuesday, Mr Albanese and Mr Dutton both watered down expectations of winning the seat, citing historical data that they claimed showed clinching victory would be a difficult task.

Labor is widely expected to retain the seat, which it holds by a two-party preferred margin of 6.3 per cent, while Coalition strategists expect it could secure a swing of between 3 and 4 per cent.

The electoral contest in Dunkley, which has a high proportion of heavily indebted households borrowers, is seen as a crucial test for the Albanese government on its track record in alleviating cost-of-living pressures.

Equally, Mr Dutton’s strategy for the next federal election, which is aimed at targeting similar outer-suburban seats, will also be put to the test.