House of Representatives

Second Reading Speech

Mr FRYDENBERG (Kooyong - The Treasurer)

I move:

That this bill be now read a second time.

This Treasury Laws Amendment (Tax Relief So Working Australians Keep More Of Their Money) Bill 2019 lowers taxes for hardworking Australians. It puts more money in their pockets, it strengthens the economy, it rewards aspiration and it should be supported by this parliament.

Our tax plan was carefully developed, and it was detailed comprehensively in this year's budget before being put to the Australian people at the election just six weeks ago. The Australian people were presented with a clear choice between the coalition's $158 billion of tax cuts and Labor's $387 billion of higher taxes on retirees, renters, home owners, superannuants, family businesses and income earners. Faced with this choice the Australian people delivered their verdict loud and clear in favour of our tax cuts, comprehensively rejecting Labor's tax hikes. Values drove our policy - to reward effort and encourage aspiration - with Liberals and Nationals wanting to see Australians earn more and keep more of what they earn.

This bill delivers on that commitment: a further $158 billion of tax relief. Our tax cuts provide both short-term relief and long-term reform. Australians earning up to $126,000 a year will receive up to $1,080, with more than 10 million Australians better off. This means that a couple - say, a teacher and a tradie - each earning $60,000 a year will get $2,160 in their family wallet. This tax relief will boost household incomes and ultimately household consumption, which will be good for the economy.

In 2024-25, the government will reduce the 32.5 per cent tax rate to 30c. This will accompany the abolition of an entire tax bracket, the 37 per cent tax bracket, which we have already legislated. The longer term structural reform will mean hardworking Australians will face a single marginal rate of tax of 30c in the dollar on the taxable income they earn between $45,000 and $200,000. Somebody who moves up the income scale by getting a promotion, working more hours or taking a second job will under these reforms get protection from bracket creep. This will improve the incentives for working Australians and reward effort.

As a result of the government's plan, around 94 per cent of Australian taxpayers are projected to face a marginal tax rate of 30 per cent or less in 2024-25. This compares to just 16 per cent if stages 2 and 3 of our tax package didn't go through. Around 13.3 million taxpayers will pay permanently lower taxes by the time the government's plan is fully implemented. The government's personal income tax measures will increase aggregate household income by around $8 billion each year over the forward estimates period. This will help support consumption growth, and given that household consumption makes up around 60 per cent of the economy the government's plan will help support economic growth. Lower taxes will increase the financial return from work with higher take-home pay, helping to encourage workers to re-enter the workforce or work additional hours if they wish. By tackling bracket creep, it will support those workers who are hit with a higher marginal rate as their wages go up to compensate for inflation.

Our tax relief measures will keep taxes as a share of GDP within the 23.9 per cent cap, ensuring that we don't impose an increasing tax burden on hardworking Australians. Securing future tax cuts now will provide confidence to Australians that they will be rewarded for their hard work and it will help protect their future pay increases from bracket creep. The government is committed to delivering a tax system that rewards effort and aspiration; a tax system that promotes opportunity and drives investment and growth; a tax system that underpins a strong economy and opportunities for all Australians now and into the future; and a tax system where all individuals and businesses pay their fair share so that the government can guarantee the essential services Australians rely on.

The government plan will maintain a progressive tax system. It is projected that in 2024-25, around one-third of all personal income tax will be paid by the top five per cent of taxpayers, a slightly higher proportion than what they currently pay. Schedule 1 to the bill enhances the current low- and middle-income tax offset by increasing the base offset from $200 to $255 and the maximum benefit from $530 to $1,080 for the 2018-19, 2019-20, 2020-21 and 2021-22 income years. Schedule 1 of this bill also increases the amount of the low-income tax offset from $645 to $700 from 2022-23. Schedule 2 of the bill increases the top threshold of the 19 per cent tax bracket from $41,000 to $45,000 from 1 July 2022. It also reduces the 32½ per cent rate to 30 per cent from 1 July 2024.

The government's first legislative priority for the 46th Parliament is consideration of the government's tax plan we took to the election. I call on the parliament to respect the wishes of the Australian people so that tax relief can flow to Australians quickly. I say to the parliament: promptly pass this bill this week and pass it in full, because lower taxes are part of the government's plan for a stronger economy. I commend this bill to the House.

Leave granted for second reading debate to continue immediately.