Taxman’s take about to hit an 18-year high

The nation’s tax burdern will hit an 18-year high before $23 billion in personal income tax relief hits.

The budget is seen as a key opportunity for the Labor government to deliver broad economic support that analysts say is fundamental to re-election chances next year.

The nation’s tax burden will surge to an 18-year high in this financial year, the budget has revealed, before $23bn in personal income tax relief from the middle of this year puts a temporary dent in bracket creep’s steady upwards march.

With the commodity price boom on the wane, the government’s fiscal position will become increasingly dependent on workers to pay for accelerating government spending.

“Higher employment and continuing strength in the labour market is a key driver of upgrades, accounting for $21.6bn of the net $27bn upgrade to tax receipts since MYEFO (the mid-year economic and fiscal outlook)”, the budget said.

Australians will pay $299.4bn in income tax in 2023-24, and a lower $293.7bn in the coming financial year as the tax cuts kick in.

By 2025-26, income tax – before refunds – will pass $300bn for the first time, and reach nearly $350bn by 2027-28.

While the personal tax tax jumps by nearly 20 per cent in the three years to mid-2028, over the same period company tax increases by only 8 per cent – or less than half.

Total taxation receipts as a share of GDP will lift from 23.5 per cent in 2022-23, to 23.8 per cent in the next financial year and the highest since 2005-06, the budget papers show. The tax take relative to the size of the economy then falls to 23.3 per cent in 2024-25 as tax cuts kick in.

The centrepiece of the budget is the long-awaited third and final stage of personal income tax cuts starting from July, which Jim Chalmers on Tuesday night also placed at the core of Labor’s cost of living relief.

Initially aimed to return more bracket creep to middle and higher income workers, Labor tweaked the Coalition-era legislation earlier this year so that all 11.5m taxpayers would receive some benefit.

The average taxpayer will receive an annual tax cut of $1888 in the coming financial year, according to the budget documents, or $36 a week.

Jim Chalmers on Tuesday evening told parliament that thanks to Labor’s changes, 84 per cent of taxpayers would get a bigger tax cut than under the Coalition’s original legislation.

“This is about rewarding the hard work of our nurses and teachers, truckies and tradies. And the 2.9 million people earning $45,000 or less, who would have received nothing,” the Treasurer said.

Measures taken by the government since December to “strengthen the fairness and sustainability of the tax system” - including extra money for the Taxation Office to crack down on fraud - will boost the federal tax rake by $3.1bn over five years, the budget says.

Personal income taxes were revised $8bn higher in 2024-25, and $26bn over the five years to 2027-28.