Save
‘Jewel’ of Australia’s tax-system destroyed in budget
By cutting out the 37 per cent tax bracket, the latest budget also removes the “jewel” that is Australia’s progressive tax system, The Australia Institute has argued.
‘Jewel’ of Australia’s tax-system destroyed in budget
By cutting out the 37 per cent tax bracket, the latest budget also removes the “jewel” that is Australia’s progressive tax system, The Australia Institute has argued.
The 2018-19 budget, announced by Treasurer Scott Morrison last Tuesday, includes the removal of the 37 per cent tax bracket.
The removal of this bracket, which applied to those earning between $120,000 and $200,000, means those earning between $41,000 and $200,000 now effectively pay the same 32.5 per cent tax rate.
That’s factoring in the higher threshold for the 32.5 per cent tax bracket, increasing from $37,000 to $41,000.
Mr Morrison argued this would simplify the tax system.
However, to The Australia Institute’s (TAI) senior economist Matt Grudnoff, the removal of the bracket is an example of how “inequitable this tax plan is”.
According to TAI modelling, 62 per cent of the benefits of the tax cuts flow through to those in the highest income brackets.
At the same time, just 7 per cent are received by the 30 per cent of Australians in the lowest-earning bracket.
In a briefing note, Mr Grudnoff said removing the 37 per cent bracket, while bumping up the 32.5 per cent threshold, will see someone earning $40,000 accrue a tax cut of $455. Someone earning $200,000 would receive a tax cut of $7,225 a year.
“The jewel in the tax system is the progressive nature of our income tax,” the economist said.
“It means those who can afford to pay more do so. Moving from a progressive system to a flat tax system means a big tax cut for those at the top and very little for those at the bottom.”
Arguing that inequality is the most significant economic issue of the time, Mr Grudnoff characterised the budget as a “radical plan to increase inequality”.
‘The best way to deliver fairness is through a stronger economy’: Scott Morrison
Mr Morrison disagrees with Mr Grudnoff’s interpretation.
Speaking to the ABC, the Treasurer defended the changes, arguing the best way to “deliver fairness” was through a stronger economy.
Questioning whether someone earning $200,000 a year was rich, he said it’s “great” that those on lower incomes will likely never face a higher tax rate, thanks to the removal of the 37 per cent bracket.
“Our tax plan is a plan. It goes over seven years. It addresses the situation for all Australians, and it provides more incentive and more reward. It’s not based on envy and bitterness,” he claimed.
According to an ongoing Nest Egg poll, 53.9 per cent of readers believe an Australian is wealthy if they have an annual taxable income of at least $200,000.
That’s followed by the 22.7 per cent who think you can be wealthy with an income of between $150,000 and $200,000.
Just over 14 per cent consider a wealthy Australian to be one with an annual taxable income of between $80,000 and $150,000, while 9.3 per cent believe a wealthy Australian can earn between $60,000 and $80,000.
Tax saving
What you need to know about the tax implications of crypto
One million Aussies are now invested in crypto, but many have not thought about how these investments will affect them at tax time. ...Read more
Tax saving
Welfare overhaul could give recipients a leg-up
Australia’s Centrelink recipients who’ve been doing it tough are in for a potentially easier time if the federal government pursues ambitious reforms that could provide sturdier safety nets. ...Read more
Tax saving
Students should think twice before tapping into their super
Former students might want to think carefully before they look to take advantage of the federal government’s biggest first home buyer incentive. ...Read more
Tax saving
Advocates call for an end to tax cuts
Social services sector advocates have warned that further tax cuts may make solving Australia’s biggest challenges much harder. ...Read more
Tax saving
ATO and AUSTRAC may gain new phone-tapping powers
A proposed update to electronic surveillance legislation could see the ATO armed with new powers that would allow the agency to bug phones and intercept online communications. ...Read more
Tax saving
Over 2m Aussies asked the TPB for help during the last year
As the economy recovers, Australia’s tax regulator says it’s planning to put unregistered practitioners under the microscope. ...Read more
Tax saving
Will you pay higher taxes due to bracket creep?
Bracket creep will see Australians paying more tax on average, unless further cuts are introduced in the future. ...Read more
Tax saving
10 ways to reduce your tax bill
With the tax return deadline only one month away, these tips could help minimise your tax bill. ...Read more
Wrapping up an eventful 2021
Listen now
What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now
Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now
Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now
Tax saving
What you need to know about the tax implications of crypto
One million Aussies are now invested in crypto, but many have not thought about how these investments will affect them at tax time. ...Read more
Tax saving
Welfare overhaul could give recipients a leg-up
Australia’s Centrelink recipients who’ve been doing it tough are in for a potentially easier time if the federal government pursues ambitious reforms that could provide sturdier safety nets. ...Read more
Tax saving
Students should think twice before tapping into their super
Former students might want to think carefully before they look to take advantage of the federal government’s biggest first home buyer incentive. ...Read more
Tax saving
Advocates call for an end to tax cuts
Social services sector advocates have warned that further tax cuts may make solving Australia’s biggest challenges much harder. ...Read more
Tax saving
ATO and AUSTRAC may gain new phone-tapping powers
A proposed update to electronic surveillance legislation could see the ATO armed with new powers that would allow the agency to bug phones and intercept online communications. ...Read more
Tax saving
Over 2m Aussies asked the TPB for help during the last year
As the economy recovers, Australia’s tax regulator says it’s planning to put unregistered practitioners under the microscope. ...Read more
Tax saving
Will you pay higher taxes due to bracket creep?
Bracket creep will see Australians paying more tax on average, unless further cuts are introduced in the future. ...Read more
Tax saving
10 ways to reduce your tax bill
With the tax return deadline only one month away, these tips could help minimise your tax bill. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
