Second Reading Speech
Mr MORRISON (Cook-Treasurer)I move:
That this bill be now read a second time.
This bill implements the Turnbull government's Personal Income Tax Plan to make personal income taxes lower, simpler and fairer. It's about providing tax relief for working Australians, particularly those on middle to low incomes.
By sticking to our plan for a stronger economy, the government is returning the budget to balance and to surplus and guaranteeing the essentials that Australians rely on.
And because a stronger economy delivers more revenue to the budget we are able to responsibly afford the Personal Income Tax Plan for tax relief for working Australians that is presented in this bill. It is affordable. It is fiscally responsible. More so it is necessary and will help people to manage the household budget pressures that they face.
The government is committed to a tax system that rewards effort and aspiration and promotes opportunity; a tax system that is internationally competitive, capable of driving stronger investment and stronger growth for our economy and, above all, a stronger economy, upon which everything depends; a tax system where all individuals and businesses pay their fair share so the government can deliver essential services.
Without action, the personal income tax system will increasingly penalise Australians for earning more as they move into higher tax brackets. The tax burden borne by workers will rise, reducing the rewards for effort.
As outlined in the Australian Taxation Office taxation statistics, the personal income tax burden is carried by the few, not the many. In 2015-16, the top one per cent of taxpayers paid around 17 per cent of the $186 billion tax bill for personal income tax. The top 10 per cent paid around 45 per cent of this total, compared with around 36 per cent 20 years earlier.
The government has set up a tax-to-GDP speed limit of 23.9 per cent of the economy. This prudent fiscal strategy ensures that taxes do not chase spending and overwhelm the economy and have the bizarre situation where it's like a snake eating itself from the tail.
Over the seven years of this plan, the government will provide tax relief to encourage and reward hardworking Australians and to reduce household budget pressures.
The plan will mean that individuals will be able to take on additional work, seek advancement and put the extra hours in, knowing that their extra income and their extra hard work will remain with them and that a higher proportion will not go to the government in higher taxes. Our plan will deliver a personal income tax system that is lower, fairer and simpler, consistent with Liberal-National values.
The plan will be delivered in three steps.
- (1)
- It will provide tax relief to low- and middle-income earners first.
- (2)
- It will protect what Australians earn from bracket creep.
- (3)
- It will ensure Australians pay less tax, by making personal taxes simpler and flatter.
Under our personal income tax plan, 94 per cent of Australian taxpayers will pay no more than 32½ cents in the dollar on their marginal rate. This compares with 63 per cent if we leave the system unchanged and if we do not pass this bill now. That's why it must be passed now, because we are not going to set Australia on the rails, where 63 per cent of the population are paying a top marginal rate of 32½ cents in the dollar, when we can say 94 per cent of the Australian population should be able to understand that that is the tax system that they will be living in over the next decade. They need that encouragement and they need that certainty, and they can get it now. They can get it right now by supporting the full personal income tax plan.
Step 1 of our plan will start permanent tax relief to low- and middle-income earners first as a priority, helping to ease household budget pressures. A new non-refundable low- and middle-income tax offset will provide tax relief of up to $530 to middle- and lower-income earners for the 2018-19, 2019-20, 2020-21 and 2021-22 income years. This is what can be responsibly afforded, while keeping the budget on track. That's half a year's electricity bills paid for right there with the tax relief for middle- to low-income earners that is being delivered by the Turnbull government in this budget and in this bill.
The new tax offset is in addition to the benefit lower-income earners receive from the low-income tax offset, and will be paid in the same way-on assessment after tax returns have been lodged.
This tax relief will not be clawed back by other tax increases, including the Medicare levy, which will remain unchanged, nor will it be funded by putting a higher tax burden on others. That's not how you do it. You don't have to punish hardworking Australians to provide relief to other Australians; that's called the politics of envy, not the economics of opportunity that is understood and believed by this side of the House. The other side of the House simply wants to tax more Australians more, to take taxes as a share of the economy to records that even Whitlam in his wildest dreams could never have fantasised about. Tax fantasies will become a reality for the Labor Party if they ever occupy these benches again.
Step 2 of the plan is necessary to be voted on and made certain now. It will help ensure that incomes earned by Australians are protected from bracket creep. From 1 July 2018, the government will increase the top threshold of the 32½ per cent tax bracket from $87,000 to $90,000, providing a tax cut of up to $135 per year to around three million taxpayers. This builds on the 2016-17 budget increase to the top threshold of the 32½ per cent bracket from $80,000 to $87,000, and shows the Turnbull government's long-term commitment to reforming the personal income tax system.
From 1 July 2022, the government will provide tax relief of up to $1,350 per year by further increasing the top threshold of the 32½ per cent bracket from $90,000 to $120,000. This is projected to benefit around 3.9 million taxpayers and prevent around 1.8 million taxpayers from facing the second-top marginal tax rate of 37 per cent in 2022-23.
In addition, the top threshold of the 19 per cent tax bracket will be increased from $37,000 to $41,000 providing a tax cut of up to $540 a year. The low-income tax offset will also be increased from $445 to $645. The extension of the 19 per cent tax bracket together with the increase to the low income tax offset will guarantee the benefits of step 1 are maintained on a permanent basis.
By protecting against bracket creep under step 2 of our plan it ensures that a pay rise, extra overtime or working more hours do not get eaten up by higher tax rates.
Step 3 of the plan will make the personal tax system simpler and flatter. From 1 July 2024, the top threshold of the 32.5 per cent tax bracket will be further increased from $120,000 to $200,000, abolishing the 37 per cent tax bracket altogether and reducing the number of tax brackets from five to four. This is projected to prevent around 1.8 million taxpayers from facing a tax rate higher than 32.5 per cent.
This plan provides certainty to most taxpayers, most of whom will face the same marginal tax rate through their working life. That means bracket creep will be history for the majority of working Australians under this plan to be delivered by a Turnbull government. It should be voted on by this parliament to give that certainty to those Australians right here, right now. Right here, right now is when Australians want certainty about being able to have tax relief-not just today but into the future. They need that certainty now.
I know those opposite will quibble. They'll take any excuse running to not provide tax relief to working Australians. They won't put a speed limit on their taxes and they'll be so mean to not ensure that Australians can have the certainty of tax relief both now and into the future. Any excuse to keep taxes high and to spend the economy into oblivion-that's what you'll get from the opposition time and time again. Any excuse will do.
The plan provides certainty to taxpayers. That's what it's delivering. The personal income tax plan contained in this bill-the whole deal-provides reward for effort. It provides fostering of aspiration in this country, improving incentives to strive for success. Permanent tax relief will put more of Australians' hard-earned income back into their pockets.
High-income earners will contribute to income taxes about the same way as they do now.
The personal income tax plan is a package. We are legislating that whole package, that whole plan, that whole promise, that whole commitment, that certainty that families want about when they go to work for the next 10 years they will keep more of what they earn and they won't have the Labor Party or any government in the future putting their hands deep into their pockets and ripping out their hard-earned money.
They can have that support, that certainty and that guarantee right now. We all know the history of the Labor Party on l-a-w. They know they can't be trusted. This government can be trusted though because we believe in lower taxes. We believe in them because we know it rewards effort and we know it drives a stronger economy.
We are legislating the whole package now to provide that certainty. We are legislating it to provide taxpayers certainty that they'll be protected from bracket creep into the future.
We are legislating the whole package to ensure that personal taxes will be simpler and fairer.
Schedule 1 of this bill implements the low and middle income tax offset and increases the value of the low income tax offset. Schedule 2 of the bill increases the personal income tax thresholds in 2018-19, 2022-23 and 2024-25 delivering significant tax cuts to Australian taxpayers.
We are the party of responsible budgets and lower taxes. This plan is affordable. It's funded in the budget; it's consistent with our fiscal rules; it's returning the budget to a balance of over one per cent of GDP over the medium term; and it's bringing us back to a balance in 2019-20 with surpluses building after that and, at the same time, keeping taxes under the speed limit, which is what taxpayers expect. Under the Labor Party, too much tax is never enough-it's never enough! The Liberal Party and the National Party know that too much tax is too much tax. It has to be restricted so Australians can be guaranteed and have the certainty of their encouragement through the tax system that is in place.
We are the party of responsible budgets. We are the party of lower taxes. There is a clear choice: higher taxes under the Labor Party that suffocate the economy or lower taxes under the Liberal-National Party that provide the stronger economy that guarantees the essential services that Australians rely on-Medicare and the National Disability Insurance Scheme. Higher funding for schools and higher funding for hospitals are in the budget I delivered last night. That is all delivered by a stronger economy, which the Labor Party wants to suffocate with $220 billion of higher taxes and denying tax relief to hardworking Australians. I commend the bill to the House.