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Treasurer Josh Frydenberg defends tax cuts in fiery exchange

CANBERRA, AUSTRALIA - MAY 12: Federal Treasurer Josh Frydenberg holds a copy of the 2021-2022 Federal Budget before he delivers his budget address at National Press Club, in the Great Hall at Parliament House on May 12, 2021 in Canberra, Australia. The Morrison government's third budget, handed down on Tuesday, has an increased focus on women, with almost $354 million in funding allocated for women's health. Treasurer Josh Frydenberg also outlined more than $10 billion in spending on major infrastructure projects across Australia aimed to help create local jobs and boost productivity in the COVID-affected national economy. Aged care will receive more than $10 billion over the next four years, in direct response to the findings of the Royal Commission into Aged Care Quality and Safety. (Photo by Sam Mooy/Getty Images)
Federal Treasurer Josh Frydenberg holds a copy of the 2021-2022 Federal Budget before he delivers his budget address at National Press Club. (Photo by Sam Mooy/Getty Images) (Sam Mooy via Getty Images)

Treasurer Josh Frydenberg faced a grilling on national television over the weekend over whether stage three of the planned tax cuts will benefit lower-income Australians.

In the 2021 Budget, the Treasurer announced an extension of the lower- and middle-income tax offts (LMITO) that will see people earning under $90,000 be able to get up to $1,080 shaved off their tax bill.

Meanwhile, the controversial stage three of the tax cuts, announced as part of the 2018-19 Budget and due to kick in on 1 July 2024, will see the entire 37 per cent tax bracket abolished, meaning people earning between $45,000 and $200,000 would pay the same tax rate.

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The 32.5 per cent tax rate would drop to 30 per cent with the upper threshold of this bracket to rise from $90,000 to $120,000, while the 45 per cent lower threshold would rise from $180,000 to $200,000.

But over the weekend, Frydenberg struggled to answer questions from ABC Insiders host David Speers about the affordability and benefit of the Stage 3 changes to Australians.

“How are they still affordable when you’re now using borrowed money?” Speers asked.

Australia is currently staring down a national deficit of $161 billion.

“They do create a stronger and fairer system, that’s really important,” Frydenberg said.

When Speers pushed again about the affordability of the measure, the Treasurer responded:“They’re rewarding Australians in work, and it’s returning more of their money.”

Speers then asked about the fairness of the tax cuts, citing figures that would see those earning $45,000 worse off by $850 a year, while someone earning $60,000 would be $700 worse off. Meanwhile, those earning $80,000 would see a $2,000 hit to their pockets.

Meanwhile, someone earning $200,000 or more would be $9,000 better off under the tax cuts, Speers said.

Analysis from The Australia Institute has also found that more than 50 per cent of the Stage 3 tax cuts would overwhelmingly benefit Australia’s high-income earners.

Similarly, fresh analysis from the Bankwest Curtin Economics Centre found that those earning $120,000 – and “particularly” those earning more than $180,000 – would “disproportionately” benefit from Stage 3.

But Frydenberg side-stepped Speers’ question about fairness altogether, and instead attempted to point blame at the Opposition: “Well, if Anthony Albanese abolishes these tax cuts…”

“No I’m not asking about Labor, Treasurer,” Speers said, cutting him off. “How will they be better off than they are today?”

“If you don’t go forward with Stage 3 of the tax cuts, someone on $80,000 would be $900 worse off,” Frydenberg insisted.

Speers pointed out that the LMITO would end, leaving people currently benefiting from the measure ultimately worse-off.

But that measure – which has now been extended twice – was temporary, Frydenberg said, and was not a permanent feature of the tax system, unlike the scheduled changes to the tax brackets.

When asked whether those earning below $80,000 would be worse off in three years’ time, Frydenberg said: “You’re not comparing an apple and an orange.”

“With respect I am,” said Speers. “No you’re not,” Frydenberg fired back.

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