Labor’s changes to stage three tax cuts will pass parliament after the Coalition agreed to the reform that redistributes benefits to low- and middle-income earners.
The Coalition party room met on Tuesday, endorsing a decision of shadow cabinet to attempt to amend but not to vote against Labor’s tax plan despite weeks of arguing that Anthony Albanese had lied and reneged on his commitment to the tax cuts before the 2022 election.
The decision clears the way for the $359bn tax cut package to pass parliament in February ahead of the changes taking effect in July, although the Greens are still in negotiations that could result in an inquiry into the changes.
Peter Dutton on Tuesday confirmed that the opposition “will not stand in the way of providing support to Australians doing it tough”, but indicated the Coalition would seek to make further tax changes after the next election.
“We are supporting this change not to support the prime minister’s lie but to support those families who need help now,” the opposition leader told a press conference. “Because Labor has made decisions that have made it much harder for those families and that is the position we have adopted as a party room.”
Dutton flagged the opposition would announce ahead of the next election “a significant tax policy which will reduce taxes for Australian taxpayers”.
The shadow treasurer, Angus Taylor, said this would be “in keeping with” stage three and “in-line” with its principles. Dutton said the Coalition was “not walking away from the principles” behind the Morrison-era plan to flatten the marginal rate of tax on income between $45,000 and $200,000 to 30%.
But Dutton gave no fresh commitment to abolish the 37% tax bracket, despite former prime minister Scott Morrison speaking up in the party room to advocate for the original stage three policy.
“The finer detail of our policy will be announced nearer to the election,” Dutton said.
“You can’t redesign a tax package within a fortnight from opposition … it would be irresponsible to come to you today with a policy that’s not costed.”
Dutton cited the $9bn a year cost of abolishing the 37% tax bracket, and noted that “elements of stage three” had “become redundant” because some of Labor’s changes had also benefited high income earners.
While the Coalition party room debate was subdued by widespread acceptance that opposing Labor’s bill was not feasible, ahead of the meeting Liberal MP Julian Leeser had said the opposition should vote against it.
The Liberal senator, Andrew Bragg, said on Tuesday that Labor’s plan to “return a tax bracket into the system, i.e, a new tax, which is the 37 cent threshold, is a very bad idea because it would damage aspiration”.
The Labor plan delivers bigger savings to all taxpayers earning less than $146,486 and doubles tax relief for those on the average income.
Coalition shadow ministers have been repositioning on Labor’s tax plan since last week, insisting that the Liberals and Nationals are the parties of lower tax and promising not to seek to repeal the changes.
Pressure has been mounting on the Coalition, with independent MPs including Zoe Daniel and Allegra Spender – who represent some of the electorates with the most high-income earners worse off as a result of the changes – declaring their support for Labor’s changes.
In question time the Coalition tried to shift focus, demanding Albanese rule out changes to taxation treatment of the family home and negative gearing.
On the former, Albanese said the Coalition was choosing to ask questions about “something that no one will ever do” rather than “what we are doing”.
Coalition MPs told Guardian Australia the intent of amendments will be to highlight Labor’s “broken promise” on stage three, which is likely to include at least symbolic second reading amendments and possibly substantive amendments to tax rates and thresholds.
The Coalition’s decision also sidelines the Greens, who had attempted to use their Senate voting bloc to lobby for an increase to jobseeker payments and raising the tax free threshold from $18,200.
Albanese has effectively ruled out concessions to win parliamentary support for the income tax cuts, arguing they stand on their own merits and adequacy of government payments will be considered separately.
