It’s the economy…and a looming election
Billions of dollars in tax cuts for middle-income earners took
Treasurer Josh Frydenberg last night announced the first Federal Budget surplus in 12 years, boasting an underlying cash surplus of $7.1 billion in 2019-20, with $45 billion in surpluses projected over the next four years.
The extra cash in Government coffers allowed the Coalition to sweeten its previously announced tax cuts in the lead up to a May election.
Personal tax cuts
Middle-income earners will receive immediate tax relief regardless of who wins the election after the government committed to a $530 tax cut in last year’s Budget.
Last night the Treasurer literally doubled down on those proposed cuts. If the Coalition is re-elected, Australians earning between $48,000 and $90,000 will receive an income tax cut of up to $1,080 a year for three financial years from 2018–19.
A returned Coalition government would also cut taxes for middle and high-income earners from 2024 by flattening tax brackets so those earning between $45,000 and $200,000 pay marginal rate of 30%. Workers in this range currently pay a top marginal rate of either 32.5%, 37% or 45%.
This is a further reduction from the tax cuts announced last year, which proposed the 37% tax bracket would be eliminated entirely, bringing those taxpayers down to the 32.5% rate.
Small and medium sized businesses will have their taxes cut from 27.5% to 25% by 2021-22 under the government’s Budget proposals. In addition, the instant asset write-off will be increased from $25,000 to $30,000 and it can be used every time an asset under that amount is purchased.
The Government is also expanding access to the instant asset write-off program to include medium‑sized businesses with
Very much an election year Budget
The Treasurer says returning the Budget to surplus is the result of economic stewardship but Grattan Institute Budget Policy and Institutional Reform Program Director, Danielle Wood
Wood says that while this is very much an election year Budget, she was pleasantly surprised with the level of fiscal responsibility.
“In terms of tax cuts, the first four years are quite well targeted; they’re focussed on low and middle-income earners, which in terms of getting an economic boost is sensibly placed. They also effectively
“The Government is assuming that spending as a share of GDP is going to steadily fall over the next decade, but that’s exactly the opposite of what we’d expect to occur with an
Summary of tax personal cuts
From 2018-2019 to 2021-2022, taxpayers earning up to $37,000 who currently pay a 19% tax rate will receive a lump sum offset of up to $255, while those in the next bracket ($37,000 to $48,000) will see that $255 increase incrementally up to a maximum of $1,080.
Those earning between $48,000 and $90,000 will receive the maximum offset of $1,080, with the offset reducing to zero for those earning up to $126,000. The offsets are available, after lodging their tax returns, as early as 1 July 2019.
From 1 July 2022, tax relief from the larger low and