While the allure of getting to take home more cash each month is certainly a topic that piques the interest of most of us,when we take a closer look,these tax cuts may not be the blessing they appear to be – particularly for those who need financial relief the most in the cost-of-living crisis.
While stage three tax cuts are being pitched as a boon for all,it’s the wealthiest who will benefit most.Dionne Gain
The biggest headline of this policy seems to be the elimination of the 37 per cent tax bracket for incomes between $120,001 and $180,000. Instead,this income range will now be taxed at a flat rate of 30 per cent – a very appealing decrease of 7 per cent for those lucky enough to fall into this already comfortable bracket.
On the surface this might sound like a win for the average worker,but from my perspective the reality of this decision is quite different. For high-income earners bringing in a flush $200,000 a year,the annual tax cut amounts to a substantial $9075 – the equivalent of $756 per month.
In contrast,a worker earning $50,000 will only experience a meager $125 tax cut peryear. The disparity is evident:the more you earn,the more you save under these changes. Albanese emphasises that this is not a policy exclusively for the wealthy.
While technically correct,I would argue that the focus should be on ensuring that those in our community who are struggling to make ends meet,especially given we are enduring economic uncertainty and experiencing the crippling cost of living.
Another major concern that I am also concerned about is the potential for the stage three tax cuts to contribute to our already rising rates of inflation.
The Grattan Institute’s economic policy program director Brendan Coates earlier this week and rightly criticised the decision to implement these cuts,arguing that injecting such a large amount of money into the economy in the face of inflation was economically unsound.
Given that inflation is projected to hover above the Reserve Bank of Australia’s target of 2-3 per cent,the injection of additional funds could well make the problem worse.
Increased consumer spending from high-income earners,coupled with supply chain challenges and rising costs,could contribute to an inflationary spiral – something I think we all want to avoid.
Given the current economic challenges and growing income inequality,I would have preferred to see our government directing tax breaks towards lower-income earners,it feels like the fairest and kindest way to manage this situation.
I cannot comprehend how directing a $9075 tax break to someone earning more than $200,000 is beneficial,when for those who earn less than $45,000 it would be a very welcome windfall and a far more impactful solution.
Every day the headlines around the country are, and faced by Australians,and yet – they seem to be falling on deaf ears.
An attractive tax cut of $9075 for high-income earners may provide additional disposable income for a small group,but no part of these tax cuts address the pressing issues currently looming over those on lower incomes.
If you’re reading along agreeing with my sentiment (thank you!) but still wondering how the stage three tax cuts impact you directly,here’s a clearer understanding of how these changes will impact your tax bracket and take home pay.
While the implementation of the stage three tax cuts has been confirmed,it doesn’t mean we shouldn’t be discussing and questioning the broader economic implications and the distribution of benefits.
I can completely understand the appeal of having more money. But as a community,our focus should be on addressing the needs of those who are facing financial hardships,and I’m disappointed that this demographic wasn’t shown more consideration when creating these changes.
In an environment of rising inflation and economic uncertainty,redirecting funds towards programs and incentives that would benefit the wider community would have proven to be more impactful and effective.
We should be advocating for a tax policy that uplifts all Australians,rather than the ones that disproportionately favours the already financially comfortable.
After all,a thriving economy is one where everyone has the opportunity to succeed.
Victoria Devine is an award-winning retired financial adviser,best-selling author,and host of Australia’s number one finance podcast, Victoria is also the founder and co-director of Zella Money.
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