AAP FactCheck

Restoring confidence in public statements by independently testing and verifying the facts

Will the highest-income earners get a tax break from the Morrison government?

By Tiffanie Turnbull and Louise Evans

The Statement

“We haven’t changed anything for those earning on the top tax rate.”

Prime Minister Scott Morrison. May 6, 2019.

The Analysis

Prime Minister Scott Morrison defended his seven-year tax plan claiming it will give tax relief to those in urgent need and 94 per cent of Australians will not pay a tax rate marginally higher than 30 cents in the dollar. [1]

AAP FactCheck investigated Mr Morrison’s claim there is no change for wage earners paying the top tax rate of 45 per cent.

The Morrison government outlined its seven-year tax plan in the 2019-2020 budget. [2]

The budget papers show that the current highest tax bracket of 45 per cent is paid by people earning above $180,000. This is set to change in 2024-25 when the highest rate of 45 per cent will be paid by those earning above $200,000.

The budget papers show this will change the number of people in the top tax rate of 45 per cent. They show that without the changes that come into effect in 2024/25 those on the top tax rate would make up 8.0 per cent of the workforce. Under the new changes, those on the top tax rate would fall to 6.0 per cent of the workforce. [2]

From July 1, 2024, Australians earning between $45,000 and $200,000 will also face a new marginal tax rate of 30 per cent. [2]

It means those paying the top tax rate will benefit financially from the government’s planned changes that come into effect in 2024/25 because all taxpayers earning more than $45,000 will be taxed at 30 per cent, instead of 37 per cent on the amount they earn up to $200,000. [2]

Those in the top tax bracket will also pay a lesser percentage of tax on their income that falls into the newly merged middle bracket. [3]

The government’s own tax relief estimator shows those earning $180,000 will save $8,640 per year, and those earning $200,000 will pocket $11,640. [2] [4]

The Australia Institute, an independent think-tank that researches economic, social, transparency and environmental issues, analysed the impact of the government’s tax changes.

The Institute found taxpayers earning more than $180,000 per year, that is those now in the highest tax bracket, will get at least $77 billion worth of tax cuts over 10 years from 2024-25 when the Morrison government's tax cuts are fully implemented. It also found the majority of that money - $64 billion - will go to those earning more than $200,000. [5]

Based on this evidence, AAP FactCheck found Mr Morrison’s claim he hasn’t “changed anything for those earning on the top tax rate” to be somewhat false. Based on the Government’s planned changes, the top tax rate remains at 45 per cent but the number of people in that bracket will change and the amount of tax they pay will change.

The Verdict

  • Somewhat False - Mostly false, but there is more than one element of truth.

The References

1. ‘Australian politics live with Amy Remeikis’, by Amy Remeikis. The Guardian. May 7, 2019: https://www.theguardian.com/australia-news/live/2019/may/06/federal-election-2019-labor-coalition-polls-politics-live?page=with:block-5ccf8ec58f087d3be8784093#liveblog-navigation

2. ‘2019-2020 Budget - Lower Taxes’. Australian Government: https://www.budget.gov.au/2019-20/content/tax.htm

3. ‘Tax giveaways in Frydenberg’s ‘back in the black’ budget’, by Michelle Grattan. The Conversation. April 2, 2019: https://theconversation.com/tax-giveaways-in-frydenbergs-back-in-the-black-budget-114177

4. ‘Tax relief estimator’. Budget 2019-20: https://budget.gov.au/2019-20/content/estimator/incometax.htm

5. ‘A bit rich: A Government plan to make tax less progressive’, by Matt Grudnoff. The Australian Institute. April 2019: http://www.tai.org.au/sites/default/files/A%20bit%20rich%20making%20income%20tax%20less%20progressive%20-%20%255bWEB%255d.pdf

  • First published May 7, 2019 18:15 AEST