Australian families are set to pocket more than $60 a week when the government’s tax cuts kick in from July, according to new analysis from Treasury.
The federal budget’s cost-of-living measures will come into effect on 1 July, including the tax cuts and energy relief for all households and 1m small businesses.
In a statement, the treasurer, Jim Chalmers, said: “The mums and dads of middle Australia will be among the biggest beneficiaries of our tax cuts and energy rebates.”
The new analysis of the revamped stage-three tax cuts shows that any household with children will receive an average annual tax cut of $3,268 in 2024-25, amounting to a weekly tax cut of $63.
Households and couples with two children stand to benefit most, with higher average annual tax cuts than households and couples with one child or three or more children, according to the analysis.
The tax cuts for households with children are almost double those for households without children, who will receive an average annual tax cut of $1,716 ($33 weekly).
“Fighting inflation and easing the cost of living is our priority, with a real focus on families and middle Australia, and our cost-of-living relief rollout ramps up in eight days’ time,” Chalmers said.
Anthony Albanese announced the new policy of low- and middle-income tax cuts paid for by trimming benefits to high-income earners in January. The prime minister defended his party’s decision to reverse its pledge to proceed with the cuts legislated by the Morrison government in 2018, saying it was “the right thing to do” in changed economic circumstances.
Saul Eslake, an independent economist, said: “Before the government restructured the original stage-three tax cuts, a lot of households would have derived little or no benefits.
“Had they proceeded as legislated by the Morrison government back in 2018 … there almost certainly would have been substantial pressure on the government to have done something else to assist those households who would have missed out with some other form of cost-of-living relief,” Eslake said.
“In that sense, the restructuring of the tax cuts has resulted in fiscal policy being less stimulatory than it would have been otherwise.”
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Eslake said it remained uncertain whether households would spend or save the bulk of their tax cuts.
The Reserve Bank of Australia in its most recent post-meeting statement said it believed a larger-than-expected proportion of households would save the tax cuts.
Eslake said that would be beneficial from the standpoint of bringing inflation down more quickly, but bad from the standpoint of avoiding recession and larger-than-expected increases in unemployment.
However, he said “the truth is that no one really knows for sure what households will do, and we will have to wait and see what the data tells us”.
Eslake said the Treasury figures did not explain what assumptions were made about the incomes of the different members of the households for whom figures are given. He said it was not made clear why households or couples with three or more children would get less than households with one or two children, but that it could be due to the interactions between the income tax scales and eligibility for childcare subsidies.
Under Labor’s childcare policy, if families have more than one child aged five or younger in care they may get a higher childcare subsidy for their younger children.
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