Albanese government delays bonus tax cut to 2027 amid inflation concerns
Australians will not receive bonus tax breaks to offset tax increases on asset owners this year as the Albanian government aims to rein in ballooning debts and avoid stimulus that could raise inflation and interest rates.
This imprint confirmed through cabinet sources that the potential one-off tax offset for wage earners is expected to be given to voters at tax time in 2027 rather than this fiscal year.
Resisting the temptation to woo voters with a tax cut during the gas price shock, Prime Minister Anthony Albanese and Chancellor Jim Chalmers have called for the modest “top-up” tax cuts announced in last year’s budget (worth around $5 a week for those earning more than $45,000 a year) to be continued this year, to be introduced from July.
But a tax cut in 2027-28 is likely to be supported as the government seeks to provide tax relief to wage earners and salaried workers without increasing inflationary pressures that prompted the Reserve Bank to raise interest rates to 4.35 per cent last week.
Chalmers on Sunday pushed back against suggestions that he was hiding a surprise tax cut to be announced on budget night, as he did last year.
“There are tax cuts already built into the budget and there’s a new immediate cut that provides ongoing relief to the tax system, a bit of extra relief to the tax system. There’s also a reduction in fuel duty,” he told Sky News.
Tax reform, spending cuts and policies aimed at increasing the growth rate of the economy are important parts of what Chalmers describes as the government’s most ambitious budget.
Housing is at the center of the budget. It will include $500 million in new funding for faster approvals of homes, energy and critical mineral projects as part of the government’s overhaul of environmental planning laws.
In addition to $2 billion to help municipalities and utility providers build infrastructure like roads and sewer systems, almost $106 million will be spent on improving access to environmental data, with $70 million to be shared with states to improve approval processes.
As part of the tax reform package, the government is expected to proceed with negative gearing changes that will limit tax concessions to new buildings, return the capital gains tax system to its original design and cap the minimum tax rate on trusts.
The government went to the last election with the promise that it would not touch the negative gears that have been part of the tax system since the 1930s. But Chalmers said the government was aware that the tax system was making it difficult for young people to access the housing market.
“People know that we understand there is a legitimate concern about how difficult it is for young people to enter the market, and so the budget is partly motivated by that,” he said.
The budget was prepared due to increases in inflation fueled by the economic effects of the US war with Iran. Major decisions and analysis were postponed as Chalmers put the finishing touches to his budget speech on Sunday.
Chalmers announced Tuesday night that he will not forecast a budget deficit for the next four years. As this byline reveals, the comptroller will estimate that deficits, expected to average $35 billion annually, will be smaller.
He promised that all upward revisions in net savings and tax revenues of $64 billion would be banked. The biggest cut is the overhaul of the NDIS, which is expected to save $35 billion over the next four years.
There are currently no plans to extend the gasoline tax cut, which will expire on July 1, which has caused fuel prices to drop to 32 cents per liter. A decision is likely to be made in June, depending on whether the Strait of Hormuz will be opened or not.
Liberal leader Angus Taylor will respond to the Albanian government’s plans with his own budget response speech on Thursday, in which he is expected to endorse some of his own party’s key policies.
Shadow treasurer Tim Wilson said his party needed to outline a “bold and confident vision” of the country to win back voters who switched to government or One Nation.
He has signaled that the coalition is unlikely to support changes to capital gains tax or negative practices, instead focusing on tax cuts for working people with big cuts to government spending.
“My view is that this is clear, which means we need to have a tax system that encourages wealth creation, employment and growth for the next generation of Australians,” he told the ABC. insider.
“Labour’s plan is to fuel resentment and redistribution. We have wildly different views on how to build the future of the country.”
EY Australia chief economist Cherelle Murphy said the government risked increasing inflation pressures if it did not restrict spending.
“Government spending, which accounts for a record-high share of the economy, needs to avoid contributing to inflation. We know some cost-of-living measures are planned, but we hope further measures are targeted only at those in need to prevent the problem from worsening,” he said.
The budget will include a number of measures aimed at helping the business sector, including permanently keeping the $20,000 small instant asset write-off for small firms and ending fees of up to $1600 applied to builders once they reach the required construction-related regulations.
But Australian Industry Group chief executive Innes Willox called on the government to act boldly on tax reform.
“Piecemeal changes that raise revenue and plug holes in the budget are not real reform. Small, flashy tax cuts to households or businesses will not fix the dysfunctions of the tax system either,” he said.
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Shane Wright is senior economic correspondent for The Sydney Morning Herald and The Age.Connect with: X or email.
Paul Sakkal is the Chief Political Correspondent. He has previously covered Victorian politics and won the Walkley award as well as the 2025 Press Gallery Journalist of the Year award. Contact him securely on Signal @paulsakkal.14.Connect with: X or email.
