Pittwater Life Febraury 2024 Issue

Business Life: Money
with Brian Hrnjak
Business Life
What do Stage 3 tax cuts
mean in Stage 2 of FY 2024?
This month as we pass
the halfway mark of the
financial year we look
ahead to some upcoming
changes and how to play
them… A lot of the focus on
financial preparedness for this
financial year is being driven the
coming change to the personal
income tax scales. So much
media time has been taken
up with the merits of the socalled
‘Stage 3’ tax cuts that a
brief look over the politics is
probably warranted.
To do this, let’s step into a
time machine and revisit budget
night on 2 April 2019. Josh
Frydenberg has just announced
that the budget was ‘back in
black’ and to celebrate, the
Morrison Government would
implement a three-stage
program of taxation relief.
Recall that budget night was
brought forward to 2 April
and a federal election to be
held on Saturday 18 May
was announced only a week
following the budget.
Stage 1 of the program was
in the form of the LMITO – Low
and Middle Income Tax Offsets,
aka the ‘Lamington’ in 2019.
Stage 2 was an adjustment of
the scales between $37,000
and $45,000 and $90,000 and
$120,000 thresholds in 2020,
plus extensions to LMITO and
the low-income tax offset
(LITO). Stage 3 is an adjustment
of the scales between $45,000
and $200,000 thresholds. You
get the drift; lower income
earners were feted by the
government early and just
before an election. High income
earners were recognised
but put on the backburner,
potentially some governments
into the future. No-one at this
stage knew that bushfires,
floods and COVID were coming.
To continue with the
examination of the politics,
we need to look back at Bill
Shorten’s campaign during the
2019 election. I’ve seen the
clip of him jogging… you can’t
unsee it. The really relevant
item for us was his interaction
with a blue-collar worker
in Gladstone Queensland;
here’s how it was viewed in
the official election review
undertaken by Craig Emerson
and Jay Weatherill: “On a
visit to Gladstone in central
Queensland, Bill Shorten was
approached by a coal export
terminal worker who said many
of them earned $250,000 a year
through overtime and evening
shifts. The worker suggested:
‘It would be good to see higher
wage income earners given a
tax break.’ Shorten responded:
‘We’re going to look at that.’
Labor’s policy, as outlined in
the Budget reply, was to restore
the 2 per cent deficit levy
for incomes over $180,000,
increasing the tax rate for those
taxpayers. The slip or change
of position was run heavily in
the media. This further fuelled
the ‘Shifty Shorten’ narrative.
Morrison sought to capitalise on
this during the second debate by
physically advancing on Shorten,
but Shorten parried with a
‘space invader’ jibe.”
Tricky; the guy wanted to talk
about the scourge of bracket
creep, but Bill didn’t have the
heart to tell him they were
going to tax him another 2% on
his income over $180,000 (to
51% including Medicare levy) –
at least not while all those pesky
TV cameras were around.
And there in that paragraph is
the likely reason why following
the 2019 election the opposition
led by Anthony Albanese voted
with the government in passing
the Stage 3 cuts which are now
law and commence on 1 July
this year. Average earnings in
Australia according to the latest
from the ABS were just shy of
$90,000 for men and $78,000
for women. It is not unusual
for what could be considered
52 FEBRUARY 2024
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