Average Aussie to save almost $10,000 over next six years after tax cuts
Millions of low and middle income earners will pay less tax this year and tax rates will drop in coming years under a $158 billion reform delivered in the Morrison Government’s 2019 Budget. SEE WHAT IT MEANS FOR YOU.
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MILLIONS of low and middle income earners will pay $1080 less tax this year, tax rates will drop in coming years, while the average Aussie will save almost $10,000 over the next six years under a $158 billion reform.
Doubling the promised tax relief from last year means no matter who wins the election the average Australian will get about $1000 extra in their back pocket in 13 weeks time.
The ambitious plan, building on last year’s $144 billion tax reforms, will see an Aussie earning about $80,000 paying almost $2000 less tax each year within six years.
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A tax offset of up to $530 already promised last year will be increased to $1080 for the 4.5 million Australians earning between $48,000 and $90,000 a year, with lesser amounts going to all other taxpayers.
But changes to tax thresholds and dropping the tax rate over the next year will see more savings for almost all taxpayers.
Treasurer Josh Frydenberg wants you to know he is cutting how much you fork out, using the phrase “lowering taxes” or “without increasing taxes” more than a dozen times as he delivered his first budget speech last night.
He trumpeted the “largest personal income tax cuts since the Howard Government”.
“This is money that could go towards your monthly mortgage payment, your quarterly power bill or your yearly car insurance,” Mr Frydenberg said.
“This relief will flow quickly and be available to Australians after tax returns for the 2018-19 year are submitted in 13 weeks’ time.
“This tax relief will lift household incomes, ease cost of living pressures and boost spending at local businesses.
“Taxes will always be lower under the Coalition.”
There are two big structural changes to the system, building on last year when the low-income tax threshold was raised and an entire tax bracket was abolished.
The first change starts from July 2022 and will raise the threshold for the low-income tax bracket from $41,000 a year to $45,000.
This will see savings of up to $540 delivered to the more than 13 million taxpayers taking home more than $45,000 in their annual pay packet.
There will also be further tax relief for 94 per cent of taxpayers as the middle and biggest tax bracket drops from July 2024.
It means anyone earning between $45,000 and $200,000 a year will pay less tax as the rate drops to just 30c in the dollar — a reduction of 2.5c.
This change alone will mean a saving of $875 a year for someone earning $80,000 a year.
But the same person will be saving almost $2000 a year by 2024-25 when all the tax reforms are accounted for.
The average Australian is expected to be earning about $100,000 a year by 2024.
Under the past two years of tax reforms that person will be paying $3040 less tax a year by the time the all the changes are in place in 2024.
They will have paid about $10,000 less tax over the six years if the reforms are implemented.
A dual-income family taking home a combined $140,000 a year, each partner earning about the same, will pay $2160 less tax this year, $2160 less tax in 2022-23 and $3410 less tax in 2024-25.
A dual-income family taking home a combined $180,000 a year, with one partner earning a larger wage, will pay $1377 less tax this year, $3645 less tax in 2022-23 and $5922 less tax in 2024-25.
The major tax cuts will cost the budget almost $20 million over the next four years alone and will balloon out to $158 billion over the next decade.
By more than doubling last year’s tax offset from $530 to $1080, Mr Frydenberg has trounced Labor’s plan of offering “bigger, better tax cuts” of $928 to people taking home between $50,000 and $90,000 a year.
It is understood that Labor will use it’s budget reply to at least match what the government is offering to neutralise the plan and move on before the May election.
Mr Frydenberg said while 94 per cent of taxpayers would be in the 30c tax bracket, it was still a progressive system.
“The top five per cent of taxpayers are paying one third of all income taxes collected,” he said.
“Someone earning $200,000 is paying 10 times as much tax as someone on $45,000.”
He said taxes as a share of the economy would not exceed a cap of 23.9 per cent.
“We will put a speed limit on taxes, while our opponents will put a speed limit on the economy,” Mr Frydenberg said.
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