Stage 3 tax cuts: Cost-of-living pressures stoked Treasury officials to make urgent decision

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A Labor frontbencher has locked horns with a Liberal senator after it was revealed changes to the federal government’s stage 3 tax cuts were the “only option” to relieve struggling households.

Finance Minister Katy Gallagher was interrogated by opposition finance spokeswoman Jane Hume during a heated cost-of-living inquiry on Friday.

It came after a sweeping overhaul to stage 3, which reworked the Morrison-era policy to give workers earning less than $150,000 a greater tax cut, as passed with the Coalition’s reluctant support on Tuesday.

Liberal senator Jane Hume demanded to see a list of alternative cost-of-living measures put forward by Treasury officials after being tasked to look at relief options following a meeting on December 11.

“What were the other options?” Senator Hume probed.

Ms Gallagher laughed in frustration.

“This is the advice that came to the government,” she said, referring to cabinet documents released by Labor after announcing the stage 3 overhaul last week.

“You have the advice.”

“Minister, are you telling me that there isn’t another document out there that demonstrates there is more to this. Because that might be something that you live to regret. Would you like to put your name to that?” Senator Hume responded.

“This is the advice that come to government,” Ms Gallagher firmly replied.

Under Labor’s reworked stage 3 tax plan, due to come into effect on July 1, the 37 per cent tax bracket will remain for incomes between $135,000 and $190,000, and the top 45 per cent bracket will kick in for earnings more than $190,000 – instead of the previously slated $200,000.

Treasury secretary Steven Kennedy told the inquiry on Friday that despite coming up with “numerous” options over the summer, it became increasingly apparent that shifting tax arrangements would be the most effective way to dole out large-scale relief.

He confirmed that Treasury officials had not been specifically tasked by Treasurer Jim Chalmers to look at the already legislated tax changes following an initial meeting in early December.

“In addressing this problem in getting to many millions of people, rather than that targeted low (income) group, it’s not an inevitability that you have to do this the way we do it,” Dr Kennedy said.

“It’s pretty difficult to think of an alternative way to solve it.”