The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

11 May 2010

NO.032

July 2010 Tax Cuts to Help with Cost of Living Pressures and Strengthen Our Economy

The Rudd Government will deliver its third round of tax cuts from 1 July this year to help millions of Australian families with cost of living pressures and reward their hard work.

This tax relief means the Government has provided tax cuts in each of its three budgets, delivering on its 2007 election commitment in full, despite the pressures placed on the budget by the global recession.

The Rudd Government designed these tax cuts to boost incentives for labour force participation, driving greater economic activity and expanding the capacity of the economy.

Treasury has estimated that the cumulative impact of the Government's three rounds of tax cuts will boost employment by around 85,000 workers in the medium term.

Together with our new business tax reforms, as well as major investments in infrastructure, skills and education and other reforms, these three rounds of personal tax cuts are a key part of the Government's plan to strengthen our economy so we can face the future with confidence.

Combined with the Government's stimulus payments – which were directed largely to low and middle income families – these three rounds of tax cuts have delivered more money in the pockets of Australian workers.

The Government has also delivered an historic increase in the base rate of the pension despite the budget impacts of the global recession, as well as stimulus payments to help older Australians with cost of living pressures.

From 1 July 2010, the increase in the Low Income Tax Offset (LITO) will allow Australians to earn up to $16,000 and not have to pay income tax (up from $11,000 in 2007-08), providing a real benefit to low income and part-time workers.

From 1 July 2010:

  • The Low Income Tax Offset will increase from $1,350 to $1,500;
  • The 30 per cent threshold will increase from $35,000 to $37,000;
  • The 38 per cent marginal tax rate will decrease to 37 per cent; and
  • The amount of income a senior Australian eligible for the Senior Australian Tax Offset (SATO) can earn before they pay income tax or the Medicare Levy will increase from $29,867 to $30,685 for singles, and from $25,680 to $26,680 for each member of a couple.

Compared with their income tax liability for 2007-08 (and excluding the Medicare Levy), by 2010‑11:

  • A person earning $20,000 will have received an income tax cut of around 56 per cent;
  • A person earning $50,000 will have received an income tax cut of around 18 per cent; and
  • A person earning $80,000 will have received an income tax cut of around 8 per cent.

For example, these tax cuts will mean that a family with two young children where one person earns $60,000 and their partner earns $27,000 will be $40.38 per week, or around $2,100 a year, better off.

The following table shows the weekly increases in disposable income from income tax cuts since 2008-09.  The benefits are compared to 2007-08 and are cumulative from year-to-year.

Cumulative tax cuts – single taxpayer

Taxable income Tax cut – weekly Tax cut – annual
2008-09 2009-10 2010-11 2008-09 2009-10 2010-11
$ $ $ $ $ $
$15,000 8.65 11.54 11.54 450 600 600
$20,000 8.65 11.54 14.42 450 600 750
$25,000 8.65 11.54 14.42 450 600 750
$30,000 8.65 11.54 14.42 450 600 750
$35,000 20.19 25.96 28.85 1,050 1,350 1,500
$40,000 20.19 25.96 34.62 1,050 1,350 1,800
$45,000 20.19 25.96 34.62 1,050 1,350 1,800
$50,000 19.23 25.00 33.65 1,000 1,300 1,750
$55,000 15.38 21.15 29.81 800 1,100 1,550
$60,000 11.54 17.31 25.96 600 900 1,350
$65,000 11.54 14.42 22.12 600 750 1,150
$70,000 11.54 14.42 20.19 600 750 1,050
$75,000 11.54 14.42 20.19 600 750 1,050
$80,000 21.15 24.04 29.81 1,100 1,250 1,550
$85,000 21.15 25.96 32.69 1,100 1,350 1,700
$90,000 21.15 27.88 35.58 1,100 1,450 1,850
$95,000 21.15 29.81 38.46 1,100 1,550 2,000
$100,000 21.15 31.73 41.35 1,100 1,650 2,150
$105,000 21.15 33.65 44.23 1,100 1,750 2,300
$110,000 21.15 35.58 47.12 1,100 1,850 2,450
$115,000 21.15 37.50 50.00 1,100 1,950 2,600
$120,000 21.15 39.42 52.88 1,100 2,050 2,750
$125,000 21.15 41.35 55.77 1,100 2,150 2,900
$130,000 21.15 43.27 58.65 1,100 2,250 3,050
$135,000 21.15 45.19 61.54 1,100 2,350 3,200
$140,000 21.15 47.12 64.42 1,100 2,450 3,350
$145,000 21.15 49.04 67.31 1,100 2,550 3,500
$150,000 21.15 50.96 70.19 1,100 2,650 3,650
$155,000 25.96 57.69 77.88 1,350 3,000 4,050
$160,000 30.77 64.42 85.58 1,600 3,350 4,450
$165,000 35.58 71.15 93.27 1,850 3,700 4,850
$170,000 40.38 77.88 100.96 2,100 4,050 5,250
$175,000 45.19 84.62 108.65 2,350 4,400 5,650

CANBERRA
11 May 2010