Retirement
Biggest income tax cuts in a decade handed down in budget
As the Morrison government moves into election campaign mode, Treasurer Josh Frydenberg has handed down the biggest personal income tax cuts since the Howard government.
Biggest income tax cuts in a decade handed down in budget
As the Morrison government moves into election campaign mode, Treasurer Josh Frydenberg has handed down the biggest personal income tax cuts since the Howard government.
Mr Frydenberg moved for Australian taxpayers earning up to 126,000 per year to receive a tax cut in the 2019/20 federal budget.
Under the Treasurer’s proposal, from this tax time - the 2018/19 financial year - low and middle-income earners will have their tax reduced by up to $1,080 for single earners and up to $2,160 for dual income families.
Further, the Treasurer proposes reducing the 32.5 per cent tax rate to 30 per cent by in 2024-25.
The government estimates around 13.3 million taxpayers will pay permanently lower taxes in 2024-25 as a result of its package of tax changes.
Mr Frydenberg boasted that the federal government is able to deliver these changes with a surplus of $7.1 billion.
It's important to note the surplus has been forecast for the 2019/20 financial year. The current financial year will end in deficit.
The nation’s top economists are concerned about the state of the national accounts, and voiced their cautions in the months leading up to the budget's release, when it became clear a surplus would be projected for the 2019/20 budget.
“The concern is that, in an election year, both sides of politics will have an incentive to spend this windfall. But the projected surpluses are so small as to be mere rounding errors in the context of the total budget,” said PwC chief economist Jeremy Thorpe.
Further, Deloitte Access Economics’ Chris Richardson points out that a surplus budget is not necessarily a sign of a healthy economy.
“The economy is getting better but the budget is getting worse,” he said.
Others, like AMP Capital’s Shane Oliver, note that Australia has been in a per capita recession for the last two quarters for the first time since 2006.
Nest Egg will be providing ongoing insight and analysis on this federal budget, and what it means for Australian investors.
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