A key claim from Bill Shorten's budget reply speech about a doctor earning $200,000 paying the same amount of tax as a nurse on $40,000 is misleading.
In Thursday night's reply to Scott Morrison's budget, the Labor leader said it was unfair for the two workers to pay the same tax rate under changes proposed by the Coalition, due to come into effect by 2024-25.
The government expects taxpayers earning between $41,000 and $200,000 to face a marginal rate of 32.5 per cent or less if the Parliament passes changes, a move designed to make the tax system flatter and which Malcolm Turnbull says will improve fairness and drive aspiration.
"How on earth can it be fair for a nurse on $40,000 to pay the same tax rate as a doctor on $200,000? For a cleaner to pay the same tax rate as a CEO?" Mr Shorten asked in the speech.
"How can it be fair that, under this tax experiment: the doctor earns five times as much as the nurse – but his tax cut is 16 times bigger?
"Very quickly, this is looking like another mate's rates tax plan from the Liberal Party."
The budget papers show a doctor earning $200,000 is expected to pay $60,007 in tax in 2024-25, an average rate of 30 per cent, compared with $4492 for the nurse, or 11 per cent, when the Medicare levy and the low income tax offset are taken into account.
Tax Institute senior tax counsel Bob Deutsch said Mr Shorten's comment was a reference to the respective marginal rates.
"He is certainly using very broad language when he suggests the two are paying the same tax.
Greens leader Richard Di Natale said Mr Shorten "wants to have it both ways. He criticises Malcolm Turnbull's selfish tax plan to make childcare workers pay the same rate of tax as CEOs and bankers but at the same time he refuses to rule out supporting it."
Big difference
"They are not paying the same amount of tax. The person earning more is paying much more, but they are paying the same marginal rate on the next dollar that they earn.
"There is a big difference between the two," he said.
Professor Deutsch calculates that after July 1, 2024, a person earning $50,000 would pay $8007 in total tax, an average effective rate of 16.01 per cent, when the Medicare levy and effect of tax offsets were included.
A person earning $180,000 would pay $53,107, an average effective rate of 29.5 per cent.
On Friday, a spokesman for Mr Shorten said the claim was not misleading.
Greens leader Richard Di Natale said Mr Shorten "wants to have it both ways".
"He criticises Malcolm Turnbull's selfish tax plan to make childcare workers pay the same rate of tax as CEOs and bankers but at the same time he refuses to rule out supporting it," he said.
Finance Minister Mathias Cormann defended the government's changes, saying Mr Shorten's figures didn't stack up.
"Let me make it very plain for you," he said. "Somebody who earns $200,000 a year under our plan gets a 0.2 per cent tax cut. Somebody who earns $30,000 a year under our plan gets an 8.3 per cent tax cut.
"Somebody who earns $200,000 a year pays well over $60,000 in income tax a year. Somebody who earns $30,000 a year pays just over $2000 in tax."
For information about financial planning for medical professionals, please visit our Whole Wealth Medical Page
This article was published and provided by the Australian Financial Review.