Federal budget to include tax cuts
Tax relief for working Australians and small businesses is on the way as part of the federal budget, the Prime Minister has confirmed, with further tax cuts to come. HOW MUCH WOULD YOU BENEFIT?
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The federal budget will include tax relief for working Australians, Scott Morrison has confirmed, amid growing support for the government’s expected move to fast-track legislated tax cuts.
The Prime Minister told the National Press Club on Thursday that there “will be more” tax relief announced next Tuesday to boost spending and kickstart the economy.
It comes as the federal government will on Friday unveil a $105m plan to cut red tape and ease the tax burden on small businesses.
Mr Morrison said it was worth fighting for Australians to “have more money from what they have earned in their pocket”.
Asked whether tax cuts would lift spending enough to help the economy during the COVID-19 recession, Mr Morrison declared: “I never tell people what to do with their own money. Ever.”
Westpac chief economist Bill Evans said bringing forward tax cuts due in 2022 and 2024 would be a “strong statement from the government that it is serious with its efforts to boost demand”.
In 2022, the top threshold for those in the 19 per cent tax bracket is due to increase from $37,000 to $45,000, while the top threshold for those paying the 37 per cent rate rises from $90,000 to $120,000.
Mr Evans said this should be brought forward to the current financial year, while the phase due to commence in 2024 — introducing a flat 30 per cent rate for everyone earning $45,000 to $200,000 — should be brought in from July next year.
“These are exceptional times which require extraordinary responses. We would expect that the government too will recognise that need and introduce the cuts retrospectively from July 2020,” Mr Evans said.
He estimated this would cost $33bn over the next two financial years.
On Friday, Josh Frydenberg will unveil a suite of changes to provide “much-needed tax relief to small businesses as part of our economic recovery plan”.
About 20,000 businesses with an annual turnover between $10m and $50m will win concessions including immediately deducting start-up expenses — such legal and accounting advice — and avoiding fringe benefits tax on carparking, phones and computers for staff.
Small brewers and distillers will only have to pay excise monthly instead of weekly, helping their cash flow.
“Enabling small businesses to keep more of what they earn means they can keep operating, pay their bills and retain or hire more staff,” the Treasurer said.
Mr Evans forecast Mr Frydenberg’s budget deficit would hit $240bn and that Australia’s debt bill would top $1 trillion by 2022.
But he backed the government’s plan to borrow its way out of the recession, and also suggested a revised JobKeeper wage subsidy scheme to continue after March next year.
Mr Evans predicted unemployment would remain above 6 per cent into 2023 — the level which Mr Frydenberg has set before the government starts winding back support measures and paying down the debt and deficit.
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