Tax rules will be changed within weeks to deliver the $17.8 billion income tax cuts promised in the federal budget after Labor sent a formal letter to the Australian Tax Office to back the plan.
Tax officials have begun work on the schedules in order to implement them this month, but they expect pay offices to take a further six to eight weeks to apply the changes to salaries.
Treasurer Josh Frydenberg declared he could not do more to deliver the benefits any faster even though the changes to tax rates are being backdated to July 1, holding out the promise of bigger tax refunds for some workers.
Mr Frydenberg said workers would have to wait for the end of this financial year to benefit from the backdated change in the form of any refund on taxes they have already paid this year.
In an important move to speed up the process, Labor treasury spokesman Jim Chalmers wrote to ATO commissioner Chris Jordan on Wednesday to make it clear the income tax cuts had bipartisan support.
"I am writing to confirm Labor's support for the government's announced amendments to bring forward stage two of its personal income tax plan to apply for the 2020-21 income year alongside the low and middle income tax offset [LAMITO]," Mr Chalmers wrote.
"I note that you require public bipartisan support for these amendments to be able to implement the updated tax withholding schedules prior to the passage of amendments through Parliament."
The ATO, having been assured of the bipartisan support, issued a statement on Wednesday saying it was ready to apply the changes to pay-as-you-go income tax and would work with providers of payroll software.
"Employers may need a short time to make the changes in their payroll processes and systems in order for the tax cuts to be reflected in people's take home pay," the ATO said.
"It is not possible for the ATO to determine the extent of 'over-withholding' that may have occurred for each and every taxpayer as this is highly dependent on individual circumstances and will be different for everyone."
The benefits to be delivered through the new tax schedules include an increase in the threshold for the 19 per cent tax bracket, which rises from $37,000 to $45,000, and an increase in the threshold for the 32.5 per cent tax bracket, which rises from $90,000 to $120,000.
But the tax changes also include the LAMITO, a one-off benefit delivered at the end of the financial year.
The LAMITO is worth $1080 for people earning from $50,000 to $90,000 with smaller amounts going to people below and above those incomes, before phasing out at incomes of about $126,000.
The government argues many workers are benefiting from tax cuts in three waves: the LAMITO paid for the tax year just finished, the reduction seen in their PAYG and the LAMITO they will receive at the end of this financial year.
Treasury secretary Steven Kennedy said this meant workers knew they would be receiving some form of refund.
"Ideally, because this is a low and middle income group, we should see quite a lot of spending out of this group. It was deliberately designed for that," he told journalists at the National Press Club.
A senior tax official told journalists that taxpayers would have to wait until the end of the financial year to get any refund or benefit from the backdated PAYG.
David Crowe is chief political correspondent for The Sydney Morning Herald and The Age.
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2020-10-07 04:53:00Z
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