Treasurer faces Senate battle on his hands but says ‘we’ll meet the parliament in the middle and we’re going to stand there waiting for support’

Scott Morrison willing to take Medicare levy increase to next election

The federal government is prepared to take its proposed increase to the Medicare levy all the way to the next election, and Labor is squaring up for the fight.

The treasurer, Scott Morrison, is staring down a looming Senate battle over his proposed increase in the Medicare levy to pay for the national disability insurance scheme.

The government intends to fund the NDIS through a rise in the Medicare levy for all taxpayers from 2018 but Labor wants to the planned 0.5 percentage point increase – which would take the rate to 2.5% – to apply only to those earning more than $87,000 a year.

Morrison said there was a $55.7bn gap in NDIS funding and all Australians should pitch in to fill the hole.

“If you’re on a higher income, you’ll pay more under our plan. If you’re on a lower income, you’ll pay less,” he said in Melbourne on Saturday.

Medicare levy hike for low-income earners unlikely to pass Senate Read more

“But all of us will share in the responsibility of helping our mates who are living with a disability.”

The government will need to reach a compromise with Labor or seek a deal with the crossbench.

Several crossbenchers have queried the threshold for the increased Medicare levy, which would apply to people on incomes as low as $21,655 for singles.

The treasurer believes parliament will be “pragmatic” about his plan as he faces the prospect of needing 10 extra votes in the Senate to pass the funding plan.

“We’ve said we’ll meet the parliament in the middle and we’re going to stand there in the middle waiting for the parliament to come and support what is I think a very reasonable and fair position,” he said.

Asked if he would be willing to take the Medicare levy increase to an election, Morrison said: “We stand by this policy absolutely.”

The opposition leader, Bill Shorten, is digging in over the levy battle, challenging the government to drop its company tax cuts to fund core budget priorities.

Shorten's budget reply: Labor will back Medicare levy hike for top income brackets Read more

“If the government wants to go to the next election promising to raise taxes on Australians, that’s up to them,” he told reporters in Melbourne on Saturday.

However, Shorten has come under fire for Labor’s proposed top marginal tax rate of 49.5%, which the former prime minister Paul Keating has blasted as “too punitive”, much to the treasurer’s delight.

Keating has told the Australian Financial Review the top rate of personal income tax should be no higher than 39%, which is also well below the government’s proposed rate of 47.5%.

“Bill Shorten has been called out by his own. It’s not a fair plan to ask Australians to work one day for the government and one day for themselves. That is not a fair tax policy,” Morrison said.

Shorten sought to brush off criticisms of Labor’s policy, which is achieved in part by keeping the Coalition’s 2% deficit levy on high-income earners.

“I’d like to eventually tackle the marginal rates of taxation but what I definitely need to do is tackle the deficit,” he said.

“I’d rather millionaires pay a little more and every other Australian pay less, but under Mr Turnbull the millionaires get to pay less and 10 million people get to pay more.”