Josh Frydenberg has rejected suggestions low- and middle-income tax rebates will be delayed by a year but is still refusing to split the tax package to deliver faster tax relief, setting up a likely battle with Labor in the Senate.
But Centre Alliance senator Rex Patrick has offered the Coalition a lifeline, suggesting the minor party “would love to give hard-working Australians a tax cut” if it is confident income tax rebates will not cause cuts to services down the line.
On Monday evening, Scott Morrison conceded it would be difficult to recall parliament and pass the changes by 30 June, prompting accusations from Labor he had broken his promise of tax relief.
Both the Coalition and Labor agree on the first stage of tax cuts – worth a total $1,080 for people earning between $50,000 and $80,000 – but the decision to include future tax cuts for high-income earners in the same bill will make it the subject of contest in the Senate. Some $530 of the low and middle-income tax offsets is already legislated.
At a press conference in Canberra, Frydenberg confirmed the government would submit the tax plan “as a package”, including the controversial element of flattening brackets so those earning between $45,000 and $200,000 all pay a marginal rate of 30%.
He said the Australian people had supported the package at the election, and flattening tax brackets was an important “structural reform” that should be supported alongside immediate tax relief.
In the new Senate, the re-elected Morrison government will likely need the support of both One Nation and Centre Alliance to pass legislation when it is opposed by Labor and the Greens. Labor opposes the second and third stages of tax cuts and the package will likely come before the Senate before it has a new leader.
Patrick told Guardian Australia there was “no rush” to make the “$20bn decision” because parliament would not be recalled until late June.
Centre Alliance wants a briefing from Treasury to ensure that in a softening economy the tax cuts will not trigger cuts to health, education, aged care or pensioners in the future.
In Brisbane, the Reserve Bank governor, Philip Lowe, expected the low- and middle-income earners’ tax offsets “will boost disposable income” and warned household income growth would be 0.3% lower if they were not passed.
“And that’s moving in the wrong direction,” he said. “It would be good if there is a way for the households to get those tax offsets but the timing may mean that’s very difficult and it may have to wait until next year.”
Lowe flagged likely interest rate cuts at its next meeting, suggesting if unemployment rates stayed around 5% then inflation was “likely to remain low relative to the target and that a decrease in the cash rate would likely be appropriate”.
Lowe said “it would be a mistake” to rely on monetary policy as the only lever to improve employment. He advocated strong spending on infrastructure and suggested that “additional fiscal support” and structural industrial relations changes could also boost employment.
On Monday evening, Morrison told Sky News that the government would “have to wait for the writs to be returned” before deciding when to recall parliament to consider the tax measure.
“At the moment, it is not looking like until the back end of June,” he said. “So that really does make very narrow that opportunity to do it before June 30, and I think that is very unlikely with the advice I have received.”
The shadow treasurer, Chris Bowen, accused Morrison of having “broken his promise” just days after the election. “And it’s worse than that – he lied about it,” Bowen said.
Bowen said during the election campaign Morrison had insisted the government could deliver the tax cut “administratively” – by an order to the Australian Tax Office before legislation passed.
“I pointed out that that was wrong and the ATO said it was wrong,” Bowen said. “And he denied it. He wasn’t telling the truth. That, I think, says a lot about this government.
“If the Australian people have to wait another year for the tax cuts, I think it’s an indictment on his government and the character of the prime minister.”
Frydenberg said reports the tax cuts would be delayed by a year were “wrong” and they “will be delivered as set out in the budget” – for the 2018-19 financial year.
The treasurer said it looked like parliament would resume at “the end of June” and called on Labor to support the entire package.
“The ATO have made it clear, as soon as the legislation is passed, [people] don’t need to put in another return, they will get the benefit if eligible.”
