Budget 2014: Workers earning over $180,000 per year to pay 49 per cent tax rate

TREASURER Joe Hockey confirms workers earning over $180,000 will help “repair” the budget by paying a 49 per cent tax rate under a temporary levy.

Repair job ... when the 2 per cent Medicare levy charge is also included, the tax hit on high-income earners is over 49 per cent.

WORKERS earning over $180,000 a year will be asked to pay the taxman an effective 49 per cent tax rate under a new Temporary Budget Repair Levy.

Treasurer Joe Hockey confirmed the new levy in the 2014 Budget, pledging it would only apply for three years.

Under the tax impost, the 45 per cent top tax rate will be increased by 2 per cent. When the 2 per cent Medicare levy charge is also included, the tax hit on income over $180,000 a year is 49 per cent.

The tax impost will hit an estimated 400,000 workers.

Workers earning less than $180,000 a year will not be asked to pay the levy.

Angrily dismissing claims it represented a broken promise on tax, Mr Hockey said the government could not exempt high-income earners from the budget repair task.

“Everyone is going to make whatever allegation against us they want. People are entitled to do that,’’ Mr Hockey said.

Everyone contributes ... the tax hike will force Prime Minister Tony Abbott, who earns $500,000 per year, to pay an additional $6400 a year.

“The most significant promise we made was to fix the budget and strengthen the economy.

“The fact is, we were not prepared to stand by while a fire was starting in the house.”

Workers earning $200,000 a year will be asked to pay $400.

For Prime Minister Tony Abbott, who earns $500,000, the tax hike will force him to pay an additional $6400 a year. Over the next three years, Mr Abbott will pay $19,200 in extra tax.

But there are concerns that the richest Australians will be able to escape the tax by using trusts and tax minimisation schemes.

Repair job ... when the 2 per cent Medicare levy charge is also included, the tax hit on high-income earners is over 49 per cent.

The three-year time frame for the temporary tax impost raises the prospect that the Abbott Government may dump the tax before the next election if the budget improves.

News of the deficit levy was first reported by News Corp Sunday papers late last month, blindsiding Cabinet ministers who revealed they read about it in the newspapers. The decision also angered marginal seat MPs who publicly attacked the tax increase.

The Prime Minister has confirmed that the Budget razor gang considered a range of income thresholds for the tax but insisted families not face a double hit from a combination of the family tax changes and the deficit levy. Earlier reports suggested the Abbott government had considered imposing the levy on workers earning $80,000 a year or more.

“Tonight we are asking higher income earners to help repair the Budget. From 1 July this year and for just three years, we are asking higher income earners to pay a Temporary Budget Repair Levy that in effect increases the top marginal tax rate by two percentage points, for people earning more than $180,000 a year,’’ Mr Hockey told Parliament.

“It is only fair that everyone makes a contribution.”

Originally published as Budget 2014: Workers earning over $180,000 per year to pay 49 per cent tax rate