In recognition of the financial pressures on many Australian families, tonight the Budget delivers tax relief worth $46.7 billion over the next four years.
The tax cuts will boost participation in the labour market at a time of acute skills and labour shortages and will reward the efforts of hardworking Australians. The tax relief package is focused squarely on low‑ and middle‑income families. Taxpayers on incomes above $180,000 will benefit from the tax cuts; however, the reduction in the top marginal tax rate announced in the Mid Year Economic and Fiscal Outlook 2007-08 will be deferred until beyond 2010-11. The savings from this deferral will be redirected to the Government's other priorities, including the Education Tax Refund, to help parents with the cost of educating their children.
From 1 July 2008:
From 1 July 2009:
From 1 July 2010:
The personal income tax rate reductions are carefully designed to enhance incentives for labour force participation. Economic modelling undertaken by Treasury indicates the tax cuts alone will lift aggregate labour supply, a critical task in an environment of skills and labour shortages which are adding to inflationary pressures, by around 65,000 workers in the medium term.
This additional supply of labour, together with the anticipated increase in the hours worked by workers currently in the workforce, will mean around 2.5 million additional hours of work in the economy each week.
These participation benefits will be further enhanced by the Government's commitment to increase the Child Care Tax Rebate to 50 per cent.
Taken together, these changes will dramatically improve the incentives for second income earners to participate in the workforce or increase their hours of work, adding to the capacity of the economy and helping to tackle inflationary pressures.
These tax cuts are in addition to the 2007-08 Budget measure to increase the 40 per cent threshold from $75,001 to $80,001 and the 45 per cent threshold from $150,001 to $180,001 from 1 July 2008.
13 May 2008