Australia PM set to water down proposed tax cuts for wealthy

SYDNEY (Reuters) – Australia Prime Minister Anthony Albanese said on Wednesday he would consult lawmakers to modify proposed tax cuts for higher earners, potentially breaking an election pledge in a decision likely to face strong resistance from the opposition.

The already-legislated tax cuts were due to abolish a 37% tax band for those earning A$120,000 ($78,960) to A$180,000, as well as applying a 30% tax rate to income between A$45,000 and A$200,000 which currently begins at 32.5%.

Local media reported the 37% band would be retained under the new proposal, with the saving redirected to those on middle and low incomes.

Albanese told a news conference he would be taking a revised proposal to Labour parliamentarians later on Wednesday, without elaborating further.

“We understand that Australians are under pressure. And we’re providing support through the plan that I’ll take to the Party room this afternoon,” focusing on middle Australians, he said.

Albanese has faced criticism over his repeated promise to retain the tax cuts, as many in the country suffer from a cost of living crisis where outgoings including rents and food prices have far outstripped wage growth.

But reneging on his election promise also comes with political risk, with Albanese’s approval ratings close to their lowest levels since taking power in May 2022.

Albanese’s Labor Party has a majority in the country’s lower house of parliament, but will need support of the minority Greens to pass any changes to the tax cuts through the upper house.

The opposition coalition strongly supports the tax cuts, which it first proposed while in government.

The Australian Financial Review reported the modifications would be budget and inflation neutral.

($1 = 1.5198 Australian dollars)

(Reporting by Alasdair Pal in Sydney; Editing by Lincoln Feast.)