Published: Tue, May 08, 2018
Medical | By Marta Holmes

Budget has tax cuts, surplus a year early

Budget has tax cuts, surplus a year early

The tax relief will be delivered by an increase to the Low Income Tax Offset (LITO) which doesn't show up in weekly or fortnightly pay packets. Voters are more inclined to think the economy is improving than they were this time previous year, with 39% rating the state of the economy as good (up 6% from November, and 9% since last May), while 24% thought it was bad.

The promise of personal income tax cuts has been hinted at for months. Only workers who earn enough money to actually pay tax will enjoy the benefit. It will be delivered in a lump sum via a tax offset in your annual tax return from July 1.

At the moment, the LITO is worth $445 a year for people earning below $37,000 annually.

If you look at it as a lump sum, it's enough to buy a washing machine, cover your auto rego or pay your family's quarterly power bill.

"It took us 10 surplus budgets to pay off last time", he told Leigh Sales on ABC-TV's 730 program.

The government had already announced some big ticket items, including half a billion dollars to protect the Great Barrier Reef and plans to do away with a freakish beer tax that hits craft breweries 40 percent more simply because they use smaller kegs.

But according to Sky News, Cormann indicated that Australians in the higher tax brackets will be waiting for tax cuts.

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The prime minister, addressing a meeting of Liberal and Nationals MPs in Canberra on Tuesday, urged his colleagues to personalise the budget message of a strong economic plan for jobs and growth and one that delivered tax relief, ensured the delivery of essential services as well as providing funding for new infrastructure to make life better for Australians.

But there are also plans to give major tax relief to those earning bigger bucks further down the track.

In four years time the $37,000 tax threshold will be lifted to $41,000.

This means 1.8 million taxpayers would avoid paying the higher 37 per cent rate and 94 per cent of Australians would pay no higher 32.5c.

Just under half the sample, 47%, think the budget will be good for Australian business (up 4%) - perhaps reflecting the fact the government is persisting with its big business tax cut in Tuesday night's statement despite parliamentary opposition - and 35% believe it will be good for the economy overall (up 14%).

"Why should their business be held back because of tax systems that are out of date?"

The top marginal tax rate would remain at 45 cents, but the income threshold at which it kicks in would rise from $180,001 to $200,001.

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"What the government seems to be proposing to do is to give tax cuts on the back of a temporary spike in revenue, as well as some likely very optimistic projections about wages and other things in the budget to give permanent tax cuts off the back of that".

Despite the hefty price tag, the Treasurer says the tax plan is "affordable and funded".

'We've now had 10 years of deficit, cumulatively that means to cover that, we've had to borrow $370 billion, ' he said.

Treasurer Morrison is also looking to cut both rates and tax thresholds for wealthier Australians, but this will only be over the longer term.

"More tax is being recovered and we're saying too much is coming in out of people's pockets and they should get to keep it", he said.

The buoyant business conditions that have provided Scott Morrison with a tax revenue windfall for Tuesday's budget look like lasting a while yet.

The measures are also created to increase disposable incomes to relieve household budget pressures. The 2018/10 budget papers are pictured.

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