Workers will get hundreds of dollars back in their pockets at tax time next year after Malcolm Turnbull’s full income tax cuts plan passed the Senate.
But the big winners are people on high wages, who will get thousands back every year once another round of cuts take effect in 2024.
“This is the most comprehensive reform of personal income tax in a generation,” the prime minister told reporters in Canberra on Thursday.
“It is fair. It rewards and encourages enterprise, it encourages and enables aspiration.”
Labor has promised to repeal the final stage of the plan if it wins the next election.
Australians in the top tax bracket in 2024 will pay a larger share of income tax than they do now, the prime minister said.
“So those on the highest incomes will continue to pay most of the tax,” he said.
The $144 billion tax package got through the Senate with almost all of the cross bench supporting it, despite objections from Labor and the Greens.
There was wide support for cutting taxes on people earning up to $90,000 a year, but Labor opposed the package’s third stage, which from 2024 benefits people earning up to $200,000.
That stage abolishes the 37 per cent tax bracket entirely, reducing the number of tax brackets from four to three and flattening the tax system.
Treasurer Scott Morrison said Labor’s opposition to the third round of cuts would have increased Australians’ income tax burden by $70 billion over 10 years.
But shadow treasurer Chris Bowen said the government was being reckless.
“It celebrates when it locks in $144 billion of income tax cuts when they can give no certainty, no guarantees about whether they are affordable or sustainable,” Mr Bowen told reporters.
In the Senate, Labor and the Greens voiced their anger about the way in which the government had shut down debate.
Labor’s Penny Wong said it was all about the coalition’s “political timetable”, ahead of five by-elections on July 28, rather than sound policy or fairness.
Recent polls show a majority of voters disagree with the tax cut for the most wealthy, but support the first two parts of the package.
Pauline Hanson conceded it was a gamble to support the entire package – having previously argued the third and final stage was unaffordable – but said she was now more optimistic.
“It was the only fair thing to do,” she said.
Under the first of three stages in the plan, low- and middle-income earners will get tax relief of up to $530 a year from July 1.
Independent Senator Tim Storer was the only crossbencher to vote against the bill and he attacked his former party, Nick Xenophon’s Centre Alliance, for voting with the government.