April 2019

Coalition Government's 2019 Budget

In what Treasurer Josh Frydenberg called “the largest personal income tax cuts since the Howard government,” low and middle-income earners will be some of the biggest benefactors in the proposed budget released on 2 April of this year.

At the time this article was written, low to middle income earners have been promised A$158 billion of tax relief, which would impact more than 10 million Australians.

From 1 July, single earners in this category will receive a lump sum of A$1,080 a year, whereas dual income earners will receive A$2,160.

Moreover, regardless of the election results, low-income earners in the A$22,000 to A$30,000 bracket will immediately receive tax back worth A$55 a year, while the Coalition has committed itself to giving back an extra A$550 per year in tax relief for those in the $50,000 and $90,000 bracket. These relief benefits will then taper down and cut out at A$126,000, the Guardian reports. It is worth noting that this promise more than doubles current low and middle-income tax offsets, matching commitments made by Labour in their 2018 budget reply.

This offset, combined with the 2018 budget package, would save low-income earners a total of A$255, with middle income earners saving A$1,080. These savings would give some much-needed relief to a significant percentage of the population.

Although low- to middle-income earners have been the main focus of these recent developments in the budget, upon closer look it appears that high-income earners will perhaps benefit more.

Recently released budget documents show that the top 1% and top 5% of taxpayers will be shouldering a higher tax burden than in 2017-18. However, earners in the top 10% will be paying 44% (a fall from 44.6%), while the amount paid by the top 20% will fall from 60.6% to 59.5%.

The Budget also has the government flattening tax brackets for middle to high earners making between A$45,000 and A$200,000, by lowering the 32.5% rate to 30% from 2024-25 onwards.

Flattening tax brackets to 30% in 2024 would mean that a person earning A$50,000 would receive a tax cut of A$1,205 a year. Those earning A$200,000 or more would receive a substantially higher tax cut at A$11,640 per year.

This arrangement was defended by Frydenberg, who said the changes were a kind of “long-term structural reform,” which would ensure that 94% of taxpayers are not paying more than 30 cents on the dollar, while also rewarding “hard work”.

Labour's Budget Reply

In Labour’s budget reply, Leader of the Opposition Bill Shorten confirmed the party would support the government’s plan to double offsets for low- and middle-income earners, while also pledging to enhance tax rebates for these groups.

However, the government’s proposal to flatten tax brackets in 2024 proved to be a point of contention, with Shorten describing the plan as “a ticking debt bomb”.

Shorten says that people earning less than A$48,000 a year should not be short-changed, and promised to further increase the government’s tax offset from 1 July, “at a cost of $1.05bn over the forward estimates,” the Guardian reported.



         Chartered Accountants

Tax Institure