Government could bring income tax cuts forward in response to COVID-19

The Federal Government is considering bringing forward planned income tax cuts, after Treasurer Josh Frydenberg’s acknowledgement that plunging most Victorians back into lockdown will cost the economy billions of dollars.

Greater Melbourne and Mitchell Shire will go into lockdown for six weeks, to deal with a surge in coronavirus cases in the state.

In May, Mr Frydenberg warned a return to shutdowns across the country would cost $4 billion per week, and this morning he said the lockdowns would account for about a quarter of that.

“It will impact on the numbers in terms of our forecast for growth, for unemployment, and as I say, Victoria is a big part of our economy.”

The Government will deliver an update on the economy in two weeks. The Treasurer said the Victorian crisis was being factored in to decisions that were taking place.

Mr Frydenberg foreshadowed further income support past the end of September, when the JobKeeper is due to end and the augmented JobSeeker program is due to revert back to a lower rate.

He also said the Government was considering accelerating the pace of plans to cut personal income taxes.

“There were three stages to those legislated income tax cuts,” he said.

“We are looking at that issue and the timing of those tax cuts because we do want to boost aggregate demand, boost consumption, put more money in people’s pockets, and that’s one way to do it.”

The first stage of the income tax cuts has already been implemented, giving millions of Australians a tax cut of up to $1,080.

The second stage, which is scheduled to begin in July 2022, cuts taxes for people earning between $90,000 and $120,000, and raises the threshold on the lowest tax rate.

The final stage would see people earning less than $200,000 pay no more than 30 cents for every dollar they earn, with stage three alone estimated by the Parliamentary Budget Office to cost the Government $95 billion in lost revenue between 2024 and 2030.

The Government has faced calls from some economists to bring the tax cuts forward, even in the early stages of the coronavirus pandemic.

Mr Frydenberg said further income support would be made available after the September deadline for JobKeeper and JobSeeker.

“There will be another phase of income support, it will be targeted, it will be temporary, it will be designed to get help to people who need it most,” he said.

The Federal Government today announced major banks had agreed to extend the period under which loans could be deferred by people facing financial hardship due to COVID-19.