Scott Morrison (Cook, Liberal Party, Treasurer) Share this | Hansard source

It is more progressive, indeed. So we are retaining the progressivity of the system. What the plan is also doing, though, is protecting against bracket creep. This is an incredibly important part of this plan. If you are on an average wage at the moment, the full-time ordinary wage of $84,600, in 2022-23, which is when step 2 of the plan kicks in, you will be earning $96,850 and by the end of this plan you will be earning over $100,000. Bracket creep, unless addressed, will unfairly take back from those working Australians what they haven't earned.

So what our plan is designed to do in three steps, as other speakers from the government have rightly noted, is, firstly, deliver that relief to low- and middle- income earners. We understand the pressures they face and the many expenses they have, particularly their fixed expenses–utility bills and all those things. Step 1 of our plan responsibly delivers that relief by providing a tax offset for low- to middle-income earners of up to $530 a year, which is claimed back through their tax refund. Step 2 of the plan is to adjust the thresholds in 2022-23 to address the theft of bracket creep. We do that by adjusting the thresholds from $37,000 to $41,000 and by moving the $90,000 threshold, which we have moved from 1 July this year under this plan, as part of step 2, up to $120,000. That will ensure that hundreds of thousands, if not millions, of Australians will be prevented from paying higher rates of tax. Step 3 simplifies the system. It removes the 37 per cent tax bracket so that 94 per cent of Australians will not pay more than 32.5 per cent as their marginal rate of tax.

That is a structural change to the tax system. It makes it simpler, it protects against bracket creep and it provides immediate relief. It is important to understand that these parts of the plan are linked. Step 1 and step 2 of the plan are inextricably linked, as, indeed, is step 3 to achieve all the purposes of the plan. Under step 1 of the plan, the low- to medium-income tax offset runs for those four years, and then it is absorbed into the threshold changes and the adjustments to the low-income tax offset to ensure that the tax relief for low- and middle-income earners is preserved for all time. It's preserved into the future by the adjustments to thresholds and the adjustments to the low-income tax offset that is in step 2. So the idea that you can break these two apart and not impact on low- and middle-income people shows a complete lack of understanding of or a failure to read the budget documents or a willingness to not seek to understand them. That's why it's incredibly important that we understand the componentry of this plan.

I look at the componentry of this plan and I could set out the costs for you over the short-term—over the budget and the forward estimates—and over the 10-year period. When you look at the cost of the low- and medium-income tax offset over the forward estimates, that's $11,650,000,000. Over the full 10 years, just the residual component of that step 1 program is $15.9 billion. If you look at step 2, which includes the increase in the threshold from $87,000 to $90,000, the cost over the budget and forward estimates is $1.75 billion. The cost, though, of that over the full 10-year period is $6.45 billion. When you take steps 1 and 2 together over the medium term, the cost of that program is $102,350,000,000. Now I stress that when you're projecting over the medium term, there are very real issues. Over the medium term, over a full-year period, the Treasury will advise, of course, that there are swings and roundabouts that happen with forecasts and assumptions that you make. I also stress, though, that it is nominal dollars. A dollar 10 years from now is obviously going to be worth less than the dollar is today. The dollars we're talking about here are nominal figures, so when you see larger figures in out years over the back of the medium term, those dollars don't cost the same as the dollars in the medium term. That $102,350,000,000 is the combined cost of step 1 and step 2 over the medium term, and the combined cost of the entire program over 10 years is $143,950,000,000.

So that sets out the costs of step 1, step 2 and step 3 of the plan. I think it demonstrates the proportions. Of the $143 billion or thereabouts—we've been saying roughly $140 billion—just over $100 billion is actually going to steps 1 and 2 of that program, which is targeted towards low- and middle-income earners over that period. That's what steps 1 and 2 are costing, and the total cost of step 3 over the medium term is just over $143 billion, at $143.95 billion.

This plan is also designed not just to provide this relief and deliver actual, real reform to our personal tax system and deal with real problems in the tax system; it's also designed to ensure that taxes as a share of our economy do not rise above 23.9 per cent. That is something we've set as a fiscal rule, as a tax speed limit, because we know that if you allow taxes to rise as a share of the economy to unsustainable levels this undercuts growth, costs jobs, costs investment and costs the budget. It's self-defeating. It's like a snake eating its tail. The shadow Treasurer used to believe that. He actually set us a goal of staying below 23.7 per cent. That's what he said. He said that was the test of the new coalition government. In the first election he went to subsequent to that, he came forward with a tax plan which saw tax to GDP rising to 25.7 per cent of the economy over the medium term, and I suspect it's much higher now. We don't share the view that taxes as a share of the economy should be able to consume the economy and slow growth, and we've committed to that. Our personal tax plan is designed to ensure we stay under that speed limit. That's what this plan does.

Our tax plan also does not seek to punish those who are self-funded retirees, small and medium-sized businesses, family businesses, or nurses and police officers who've decided to buy an investment property. We're not seeking to punish any of these people. That's the Labor Party's plan. What we are doing is providing this tax relief and this personal income tax plan which says that 94 per cent of Australians will not face a marginal tax rate of more than 32½c in the dollar. We're doing that without hitting anyone else with higher taxes, because we don't believe that you have to punish Australians who are working hard in order to provide relief to other Australians who are working hard. That's fair. I think that's fair. It's not fair to go around and say, 'We are going to punish you because you're doing better,' to simply provide tax relief elsewhere. We believe you can achieve both things: encourage those in all parts of the tax system—

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