Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Hansard source

The government will not be supporting this amendment. We will be opposing this amendment. This amendment proposes to keep taxes around $100 billion higher than the government's plan over the medium term. I have to correct Senator Storer: it's not a saving; it is an increase in taxes compared to what the government is proposing to do.

The government believes in lower taxes because individuals should be rewarded for working hard and be encouraged to get ahead. The government's Personal Income Tax Plan will make personal income tax lower, fairer and simpler. Without action, the tax system will increasingly penalise Australians for earning more as they move into higher tax brackets. This is why the government does not support the amendments proposed by Senator Storer.

The government's plan will simplify and flatten the tax system, reducing the number of brackets from five to four by completely removing the 37 per cent marginal tax rate so that hardworking Australians keep more of what they earn. Senator Storer's amendments would mean that by 2024-25 taxpayers on an average full-time wage would still face a marginal tax rate of 37 per cent. The government's plan rewards these hardworking Australians by removing the 37 per cent marginal rate and will ensure that most Australians will face a marginal tax rate no higher than 32.5 per cent for their whole working life. Under the government's plan, around 94 per cent of taxpayers are projected to face a marginal tax rate of 32.5 per cent or less, compared with the 63 per cent if we leave the system unchanged.

The plan is a package and the government is legislating the whole package. We're committed to giving certainty to Australian families that they will keep more of what they earn in the future. Step 2 of the plan will have to ensure that incomes earned by Australians are protected from bracket creep. It helps to ensure that a pay rise, extra overtime or working more hours do not get eaten up by higher taxes. Step 3 of the plan will make the personal income tax system simpler and flatter by completely removing the 37 per cent tax bracket. By sticking to our plan for a stronger economy, the government is returning the budget to surplus and guaranteeing the essentials.

Because a stronger economy delivers more revenue to the budget, we are able to afford our Personal Income Tax Plan. It is affordable and fiscally responsible. The plan is fully accounted for in the forward estimates and over the medium term fiscal projections, with the underlying cash balance returning to balance in 2019-20 and sustained surpluses thereafter over the medium term. The government is committed to a tax system that rewards effort and promotes opportunity, that is internationally competitive, that is capable of driving stronger investment and stronger growth for our economy and where, above all, all individuals and businesses pay their fair share so the government can deliver the essential services Australians rely on.

In relation to the observations on the fiscal position of the budget, the return to surplus in 2019-20 and continuing projected surpluses over the medium term will, of course, enable a reduction in debt. As a result of living within our means, the government has turned the corner on debt. We're no longer borrowing for our day-to-day living expenses as a government. Net debt, as a share of GDP, is expected to peak at 18.6 per cent of GDP in this 2017-18 financial year. It's projected to fall to 14.7 per cent by 2021-22 and to 3.6 per cent at the end of the medium term. The gross debt will also peak in 2019-20 at below 30 per cent of GDP. Over the medium term gross debt will fall and be $126 billion less in 2027-28 than was estimated in the MYEFO last December, six or seven months ago. I should also say that government net debt is forecast and projected to reduce by $30 billion over the current forward estimates and $232 billion over the medium term. This reduction in debt has been achieved through careful management of the nation's budget, with the average annual real expenditure remaining below two per cent, which is the lowest of any government in the last 50 years, while delivering much needed tax relief to hardworking families and investing to further strengthen our economy and deliver a more prosperous future for all Australians.