The Treasurer announced tonight that all Australian taxpayers will share in tax cuts worth $31.5 billion over the next four years. This is in addition to the $36.7 billion tax cuts provided in the 2006-07 Budget. The tax cuts will increase disposable incomes for all Australian taxpayers and provide further incentives for individuals, including part-time workers, to participate in the workforce. These changes build on the substantial tax reform delivered in previous years’ budgets and will further enhance Australia’s international competitiveness.
From 1 July 2007:
- the 30 per cent threshold will increase from $25,001 to $30,001; and
- the low income tax offset (LITO) will increase from $600 to $750 and will begin to phase out from $30,000. Taxpayers eligible for the full LITO will not pay tax until their annual income exceeds $11,000 (up from $10,000).
From 1 July 2008:
- the 40 per cent threshold will increase from $75,001 to $80,001; and
- the 45 per cent threshold will increase from $150,001 to $180,001.
The 2007-08 Budget tax cuts ensure that over 80 per cent of taxpayers face a top marginal tax rate of 30 per cent or less. A taxpayer will need to earn $134,000 to pay an average tax rate of 30 per cent in 2008-09. Taxpayers will not reach the top marginal tax rate until they earn more than three and a half times average weekly earnings in 2008-09.
The increase in the top threshold will further improve Australia’s competitiveness against other OECD countries. The increase in the top threshold from 1 July 2008 will place Australia eighth highest in the OECD in terms of the top threshold as a multiple of the average wage, up from 20th place in 2004-05.
Attachment A shows the reduction in income tax that will be provided for Australian taxpayers in 2007-08, compared to their tax payable in 2006‑07, over a range of incomes.
Senior Australians will also benefit from these changes. From 1 July 2007, senior Australians who receive the senior Australians tax offset will be able to earn more income without paying tax. Singles will be able to have taxable income up to $25,867 (up from $24,867) and couples up to $43,360 (up from $41,360). The Medicare levy low-income thresholds that apply to senior Australians will also be increased to ensure that they do not pay the Medicare levy until they begin to incur an income tax liability.
CANBERRA
8 May 2007
Media Contact: David Gazard: 02 6277 7340
ATTACHMENT A
