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AAP
Dominic Giannini and Kat Wong

Tax brawl firms up as parties push for more relief

Both major parties are promising tax relief for Australian workers. (Diego Fedele/AAP PHOTOS)

Australians could be in for greater tax refunds which ever way the wind blows at the next election with the opposition flagging a new package to let workers keep more of what they earn.

Labor's revamped stage three tax cut package is up for debate in the Senate as the government challenges the opposition to vote for the change to their original policy.

Under the amended proposal, Australians earning less than $150,000 will receive a greater tax cut than under the original plan.

Those earning more than $150,000 will still receive a tax cut but less than previously forecast.

Liberal Senator Jane Hume
Jane Hume has accused Labor of "weaponising the politics of envy in a cost of living crisis". (Lukas Coch/AAP PHOTOS)

The opposition will vote for the change to the lowest tax threshold, which will bring the rate down from 19 per cent to 16.

But it has targeted the government and the prime minister for backflipping on the position they took to the election after they repeatedly pledged not to touch the package they supported.

Opposition finance spokeswoman Jane Hume accused Labor of "weaponising the politics of envy in a cost of living crisis".

"This is the bill that finally and completely smashes any semblance of credibility that this prime minister had," she told parliament on Monday.

The coalition's policy would honour the commitment of the initial stage three reform, she said.

Aspects of the initial stage three reform Labor has cut included the abolishment of the 37 per cent tax rate.

The election platform would be fully costed, guarantee government services and be ready to implement as soon as a coalition government is elected, Senator Hume said. 

She reaffirmed the Liberals' ethos of "lower, simple and fairer" taxes.

Liberals have also flagged taking a better budget position to the election, meaning they will need to find tens of billions of dollars to make up for a budget blackhole if they take out the 37 per cent bracket.

With Labor's bill to be discussed in the upper chamber throughout the week, Treasurer Jim Chalmers has urged senators not to waste time.

"(This) all about helping Australians earn more and keep more of what they earn, because we know that's key to easing the cost of living," he said.

Greens Senator Nick McKim
Nick McKim criticised Labor for not being bolder in its reform agenda to revamp the tax system. (Mick Tsikas/AAP PHOTOS)

The bill is set to pass the Senate after the opposition said it wouldn't stand in the way of tax relief. 

But while the Greens have supported Labor's backflip, they have also maintained opposition to the original tax package. 

The party's treasury spokesman Nick McKim called on the government to go further, with people on higher incomes still set to take in thousands of extra dollars. 

He branded the new policy "slightly less regressive" and chastised Labor for not being bolder in its reform agenda to revamp the tax system and make it more progressive. 

"It beggars belief this is where we find ourselves today," he said as he pointed to the fact that people on more than $200,000 a year would still be $4000 better off. 

The revamped package will come into effect on July 1 if it passes parliament, otherwise the legislated stage three reforms will kick in from the same date.

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