Treasurer Scott Morrison has proposed tax cuts for low and middle income earners and scrapped any increase in the Medicare Levy in the 2018 Budget.
In his speech to Parliament, the Treasurer said the aim was “tax relief to encourage and reward working Australians”.
The Treasurer said the Federal Government would not increase the Medicare Levy from 2% to 2.5% in order to fund the National Disability Insurance Scheme.
No more 'bracket creep'
As part of the proposed changes, Australians earning up to $37,000 who are paying 19 cents a dollar would have their tax reduced by up to $200.
Those earning more than $37,000 and paying 32.5 cents per dollar would have their tax reduced by a maximum of $530 per year.
The Budget also proposed increasing the threshold for the 32.5 percent tax bracket from $87,000 to $90,000.
The Treasurer laid out plans for the next seven years. “In 2022-23 we will make more substantial changes. The $37,000 threshold will be lifted to $41,000, stopping half a million Australians facing a marginal rate of 32.5 per cent and the $90,000 threshold will be raised again to $120,000, preventing 1.8m Australians paying 37 cents in the dollar.”
The Treasurer also outlined the potential abolishment of the 37% tax bracket from 1 July 2024 meaning Australians earning $41,001-$200,000 would only pay 32.5 cents per dollar, with the top tax bracket starting at $200,001 rather than $180,001.
“The plan is affordable and funded. The total revenue impact on the Budget and forward estimates is $13.4 billion. The overwhelming majority of this cost commences in 2019-20, the same year the Budget is forecast to return to balance,” the Treasurer said.
Keep in mind
Any changes outlined in the Federal Budget must be passed by both the House of Representatives, which is controlled by the government, and the Senate, where proposed expenditures are subject to examination within Senate estimates hearings. This means any proposed cuts or changes outlined above may not necessarily become law.
Taxation considerations are general and based on present taxation laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information.