Deputy Leader of the Opposition Tanya Plibersek and Leader of the Opposition Bill Shorten wave after delivering the 2019-20 Federal Budget Reply speech in the House of Representatives at Parliament House, in Canberra, Thursday, April 4, 2019.
Deputy Leader of the Opposition Tanya Plibersek and Leader of the Opposition Bill Shorten wave after delivering the 2019-20 Federal Budget Reply speech in the House of Representatives at Parliament House, in Canberra, Thursday, April 4, 2019. AAP Image - Mick Tsikas

Are you better off under Liberal or Labor?

Treasurer Josh Frydenberg has delivered his Budget and Bill Shorten his reply. So after all the posturing, which party's tax cut plan will benefit who in the short term?

Given the nature of musical chairs at The Lodge as we face a potential change of government, news.com.au thought it best to look at how the proposed tax cut changes will impact households from the start of the 2020/21 financial year.

Because, after all, who knows who will lead what party by 2023.

News Corp Australia

At first glance, Labor's plan appears to have a more sizeable tax cut.

But considering a significant portion of the population earns a taxable income of between $48,000 and $80,000, the cuts mirror one-another.

In fact, those earning between $48,000 and $120,000 will be taxed the same regardless of who wins the federal election, likely to be called by Prime Minister Scott Morrison in the next few days.

From then on, Labor is pitching zero tax cuts for those with a wage between $120,000 and $200,000, while the Liberal party will give a tax cut of $135.

When the time period is extended out to 2024/25, the equation starts to look significantly different.

If the government is re-elected, it has big plans to flatten out tax rates which would lead to big cuts for the wealthy.

The government wants to lower the marginal tax rate - which covers those earning $37,001 to $87,000 - from 32.5 cents in the dollar to 30c.

 

But then the government wants to go a step further and abolish the second highest tax rate of 37c by lifting the 30c marginal tax rate threshold from $87,001 to $200,000.

This would give additional tax relief to everyone earning between $45,000 and $200,000 - more than 94 per cent of all Australians.

RELATED: The most revealing sentence in Bill Shorten's Budget reply speech

It would cut the number of income tax brackets from five to four, and would mean everyone earning between $45,001 and $200,000 would effectively pay the same tax rate.

This is a significant change to Australia's progressive tax system, which is based on the principle that those who earn more should pay a higher percentage in tax.

If implemented, it would mean an Aussie on $50,000 a year would receive a $1205 tax cut based on 2017-18 levels. Someone on $200,000 would receive a whopping $11,640.

Mr Frydenberg insists, however, the tax system will remain "highly progressive".

"The top 5 per cent of taxpayers (will pay) one-third of all income tax collected," the Treasurer said in his Budget speech.

"And someone earning $200,000 (will pay) 10 times as much tax as someone on $45,000."

In Mr Shorten's reply speech on Thursday, the Opposition leader described these tax changes as a "ticking debt bomb" in the Budget.

"We will not be signing up to the Liberals' radical, right-wing, flat tax experiment, way off in the future. A scheme which would force a nurse on $50,000 to pay the same tax rate as a surgeon on $200,000," the Opposition leader said in his reply speech on Thursday night.

Continue the conversation on Twitter @James_P_Hall or james.hall1@news.com.au


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