Tax cut comparison battle ramps up

Treasurer Josh Frydenberg will show how the coalition's tax cuts will affect workers.
Treasurer Josh Frydenberg will show how the coalition's tax cuts will affect workers.

Treasurer Josh Frydenberg is fighting back against Labor's claim that Australians earning up to $125,000 will get the same tax cuts or better if it won the election than they would under the coalition.

Labor has vowed to match the government's tax cuts plan up to $125,000 in its first term if it forms government after the May 18 poll, and offer more tax relief to lower-income earners.

But Mr Frydenberg says Labor's promise does not take into account the increased burden the party will put on housing investors and others who would be affected by its plans to end some tax breaks.

"Labor is offering increased taxes; we're cutting people's taxes," he told Sky News on Tuesday.

The coalition's plan for income tax cuts will be fully rolled out in 2024/25, at which point Mr Frydenberg says lower-income earners will get a better deal than they would under Labor.

According to the government's analysis, a worker earning $59,000 would be $542 better off while someone on $176,000 could pay $11,739 less income tax.

An early childhood worker would be better off by $943 a year under the coalition's plan than under Labor.

But Labor finance spokesman Jim Chalmers says Australians would need to re-elect Prime Minister Scott Morrison another two times beyond this election for the plan to become a reality.

He stressed new analysis by the Grattan Institute shows the government could need to cut spending by $40 billion a year up to 2030 to deliver its promised tax cuts and budget surpluses.

"The only way that Scott Morrison can pay for his plan to give big tax breaks to the top end of town is to make more devastating cuts for hospitals and schools," Mr Chalmers told reporters in Canberra.

Labor also argues the coalition's plan is unfair because it means everyone earning between $45,000 and $200,000 will be on the same 30 per cent tax rate by 2024/25.

But Mr Frydenberg said that measure was aimed at reducing bracket creep - when inflation in wages pushes people into higher tax brackets - and would thus benefit lower and middle-income earners.

The progressive nature of Australia's tax system would also be maintained, he said, with the top five per cent of taxpayers footing about a third of the nation's tax bill.

Australian Associated Press