The Albanese government is being warned that scrapping or curbing the stage three tax cuts would make Australia less competitive in the global race to attract highly skilled migrants.
The number of occupations where workers are in short supply jumped more than 85 per cent from 153 to 286 over the past year, according to the National Skills Commission’s annual skills priority list, released last week.
Mining engineers and petroleum engineers, geologists, miners and drillers are all in demand professions. BHP
Software and app developers, a variety of engineers, medical professionals, specialists in iron ore, coal and gas extraction, and financial professionals such as auditors and corporate treasurers are all in demand yet would face some of the largest cuts to their take-home pay.
Job vacancies classified as “professionals”, which tend to earn above the national average, recorded one of the sharpest rises, with the number of occupations in short supply more than doubling to 39 per cent in 2022.
It is these white-collar workers who would be among the biggest losers if the government reneges on its election commitment to keep the third stage of the Coalition’s seven-year, three part tax cut package, according to analysis of Tax Office average income data by The Australian Financial Review.
Software developers, who are the second most in-demand profession with almost 8000 vacancies and have an average taxable income of about $109,000 a year, would be $1610 worse off if the tax cuts were scrapped.
ICT business and systems analysts, the ninth most in demand job, would be about $1691 worse off; while auditors at number 20 would lose $1601.
Technical and trade workers dominated the skills shortage list in 2021, with 42 per cent of occupations in short supply; this year the figure rose to 47 per cent. These professions, too, are regularly among those that have the most to gain from the tax cuts due to come into effect in 2024.
Construction managers, who ranked fourth would lose out on about $1678 a year; electricians at 12th would be down about $1321; civil engineers at 13th would be $1782 down; and mining engineers at 18th would lose about $7613.
Innes Willox, the chief executive of Australian Industry Group, which represents companies employing about 750,000 staff, said local businesses were in a global competition to attract talent, and tax rates were a factor.
“We are competing for talent against countries like Singapore which has a personal income tax rate of 22 per cent,” he said.
“Our tax system is over reliant on personal income taxes and anything we can do to lower the tax burden will have the added benefit of making us a more attractive destination for much-needed overseas skilled workers.”
Jane Lowney, director at recruitment consultancy Robert Walters.
Jane Lowney, director at specialist professional recruitment consultancy Robert Walters, said the global race for talent had never been fiercer.
“The prevailing taxation environment has always been a factor considered by those weighing up potential relocation destinations, and there has long been a perception among potential migrants that Australia is a high tax, highly regulated market,” she said.
“That perception has been balanced against strong career development opportunities and superior offerings in terms of quality of life.
“But with countries like Singapore already rolling out a ‘new approach’ in their efforts to woo skilled migrants, we cannot afford to rest in efforts to present Australia in the most attractive light.”
Grattan Institute economic policy director Brendan Coates said while tax was one consideration for potential migrants, it tended not to be the most important for people looking at Australia.
“They’re not that important for a typical skilled professional in comparison to things like certainty about getting access to residency, and visa costs,” Mr Coates said.
“I would say the stage three tax cuts would only have a marginal ability to attract migrants from abroad because they are only part of a bigger puzzle. Australia has historically been a very attractive place for skilled migrants, and that’s obviously with the prevailing tax settings prior to the tax cuts.”
The stage three tax cuts – the final element of a seven-year, three-step process that has already benefited low and middle income earners – would abolish the 37 per cent bracket for income between $120,000 and $180,000, and apply a 30 per cent rate to all earnings between $45,000 and $200,000.
The rate above $200,000 would stay at 45 per cent, which at present applies to earnings over $180,000. The total budget cost is about $21 billion a year.
The government has signalled it could amend rather than abandon the Coalition policy legislated to come into effect in 2024, but change could still cost this cohort of workers thousands of dollars a year.
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