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

30 June 2012

Landmark tax reforms for households and businesses start tomorrow

The Gillard Government is proud to deliver landmark tax reforms starting tomorrow to build a stronger, more productive economy and provide real benefits for households and businesses

These reforms will lead to a simpler and fairer tax system, reward workforce participation, boost productivity and lift investment in those businesses not in the fast lane of the mining boom.

Landmark personal tax reform – tripling the tax‑free threshold

From tomorrow, the Government will triple the tax‑free threshold from $6,000 to $18,200 - the largest increase in the history of the tax-free threshold. This major reform will reward hard work and put more money in the pockets of millions of Australian workers, particular part-time workers such as working mums.

More than 7 million low- and middle-income earners will receive a tax cut, and more than 6 million will receive a tax cut of more than $300. 

Low income earners will receive the largest tax cuts. For example, a mother working part‑time work will get a tax cut of $600 if they earn $20,000 and $503 if they earn $25,000. 

Tax-free threshold

Tax free threshold graph - showing the differing levels of the tax free threshold from 1980 to 2020 and beyond.
By the end of the financial year, around one million people will be freed from having to lodge a tax return because they won't have had any tax at all taken out of their take-home pay.

In addition to tripling the tax-free threshold, the Senior Australians and Pensioners Tax Offset (SAPTO) will provide even more generous assistance to senior Australians. A self‑funded retiree couple with $35,000 each will receive a combined tax cut of $1,498 a year from tomorrow.

Promoting investment and productivity across the economy

The Government is delivering more business tax reform, picking up on one of the major structural business tax reforms identified by the Australia's Future Tax System review.

From tomorrow, those companies not in the fast lane of our economy will be able to invest in their people, equipment and ideas, knowing that they'll be able to carry back losses at tax time. This vital reform is funded by revenue from the Minerals Resource Rent Tax which commences today.

In its first 4 years, this major tax reform is expected to benefit 110,000 companies at a cost of $714 million, helping them to ride out the tough times and invest in a brighter future. Around 90 per cent of the beneficiaries are expected to be small businesses.

For this financial year, a one year loss carry-back will allow tax losses to be offset against tax paid in 2011‑12. In coming financial years, tax losses will be able to be offset against tax paid up to two years earlier. Companies will be able to carry back up to $1 million of losses each year – a cash benefit of up to $300,000 a year.

Businesses will now have access to their tax losses when they need them, whether they're a tourism provider refurbishing while they keep on valuable staff or a manufacturer needing to retool in order to move up the value chain.

Reducing red tape and boosting cash flow for small businesses

From tomorrow, the Government will be cutting red tape and boosting the cash flow of Australian small businesses through the $6500 Instant Asset Write-off. 

All of Australia's 2.7 million small businesses stand to benefit from these reforms, whether they operate as a sole trader, partnership, trust or company. This key reform for small business is also funded by revenue from the Minerals Resource Rent Tax which starts today.

From tomorrow, small businesses will be able to instantly write off each and every assets costing up to $6,500, rather than depreciating them over time. This is a more than six-fold increase from the $1,000 instant asset write-off under the old arrangements. 

Assets costing $6,500 or more will be pooled in a new single general small business pool (depreciated at 15 per cent in the purchase year and then 30 per cent in subsequent years).

In addition, small businesses will be able to claim up to $5,000 as an immediate deduction for new or used motor vehicles acquired from tomorrow. The remainder of the motor vehicle's cost will be pooled in the new single general small business pool. This recognises that for many small businesses their biggest asset is a ute, car or van.

The Gillard Government understands that cash flow is vital for small businesses and that the more time small business people spend with their tax return, the less time they have to devote to grow their businesses, employ more Australians and strengthen the economy. 

Extending fuel tax credits across the economy

From tomorrow, a wide range of business activities will qualify for the full fuel tax credit for the first time, providing extra support for many businesses including in parts of our economy that aren't in the fast lane of the mining boom, such as manufacturing.

Previously, construction, manufacturing, wholesale, retail, landscaping and many other off-road business activities only qualified for a half fuel tax credit of 19 cents. 

From tomorrow, these activities will qualify for the full fuel tax credit. This means that while facing a carbon price of around 6 cents a litre, their fuel costs will still be slashed by nearly 13 cents a litre. 

The net impact for these activities will be in the order of $200 million more of extra support a year. Whether they're operating a mechanical digger on a construction site, a forklift in a factory or a leaf-blower in a community park, many thousands of Australian businesses stand to gain from this important tax relief. 

For example, this changes means that a construction company operating just one heavy digger could save up to $7,000 a year in fuel costs.

Removal of the temporary flood and cyclone levy

In response to unprecedented natural disasters, the Government introduced a temporary flood and cyclone levy to help rebuild public infrastructure. 

Every dollar of the expected $1.7 billion raised from the levy has gone to flood and cyclone-affected regions. Together with the contributions of Commonwealth and state Governments, the flood levy has helped funded the biggest rebuilding effort in modern Australian history.

I would like to offer all those Australians who have paid the flood levy the sincere thanks of the both Gillard Government and of those communities who have showed such strength and resilience during very tough times.

The flood levy only applied to the 2011-12 income year, so those people who had been paying the levy will cease paying the levy as of tomorrow.