In his debut budget, Treasurer Josh Frydenberg has delivered $158 billion in personal income tax cuts.
It’s a plan to reward Australians and alleviate cost-of-living pressures, Frydenberg said alongside Minister for Finance Mathias Cormann in a joint statement.
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But even if the Coalition does win the upcoming election in May, that doesn’t mean all Australians will receive the same tax relief.
We break it down:
Low and middle-income tax offset doubled from last year’s promised $530.
This means low and middle-income earners will receive a benefit of up to $1,080 when they lodge their tax returns from 1 July 2019.
“[That’s] in just 13 weeks’ time,” the ministers pointed out.
If you’re earning up to $37,000 that means…
You’ll receive tax relief of up to $255.
If you’re earning between $37,001 and $47,999 that means…
You’ll get between an extra $255 and $1,080 back.
If you’re earning between $48,000 and $90,000 that means…
You’re in the sweet spot: you’ll be getting an extra $1,080 back. For a dual-income family, this means you’ll get $2,160.
And if you’re earning between $90,001 and $126,000 that means…
You’ll get between $1,080 and $0, depending on how close your salary is to $90,001.
Speaking on Tuesday evening, Frydenberg described these collective cuts as the “largest personal income tax cuts since the Howard government”.
“More than 10 million taxpayers will benefit, with 4.5 million receiving the full amount.”
What happens next?
Australians earning between $41,000 and $45,000 will pay less tax as of 2022-23 and will fall into the lower tax bracket of 19 per cent tax bracket.
And in 2024-25, the 32.5 per cent tax rate will be reduced to 30 per cent. By this point, that will capture all Australians earning between $45,001 and $200,000 after the 37 per cent tax bracket is removed on 1 July 2024.
Australians earning more than $200,000 will pay tax of 45 per cent in 2024-25.
What would I be paying without these policies?
Australians earning up to $37,000 would be paying 19 per cent, so not much has changed.
And if you were earning between $37,001 – $87,000 you’d be paying 32.5 per cent.
If you were earning between $87,001 and $180,000, you’d be paying 37 per cent.
With salaries of $180,000 and above you’d be taxed 45 per cent.
But under the tax policy proposed in the Coalition’s budget, all Australians earning between $45,000 and $200,000 would pay 30 per cent from July 1, 2024.
Federal budget back in black for first time in 12 years
Australia’s budget is back in the black for the first time in 12 years, but the road to bigger surpluses could be constrained by modest economic growth against a backdrop of softer global conditions.
The prospect of a long-awaited return to surplus and an accompanying coalition promise to eliminate government debt in a decade should shore up local financial markets and business confidence.
But any cheer could be tempered by the prospect that the government may not survive past the national election to fulfil its promises, with voter polls continuing to point to a Labor win in May.
The federal budget handed down on Tuesday night points to a string of underlying cash surpluses, kicking off with $7.1 billion in 2019/20 – the best number since the global financial crisis began to bite.
The forecast outstrips the government’s own projection of $4.1 billion and is broadly less than the financial market consensus of around $8 billion.
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