 Tax cuts of up to $4500 a year for high and middle income earners are the surprise announcement in tonight's federal budget. Helped by expected strong economic activity and continued robust budget surpluses, Treasurer Peter Costello has unveiled a raft of measures usually associated with pre-election budgets. These include the abolition of the superannuation surcharge and $1.8 billion of business tax cuts including the removal of all tariffs on imports. These are being funded from a $7.5 billion boom in company tax receipts off the back of strong company profits. As expected, the Government has also unveiled initiatives to encourage or force welfare recipients to return to paid work. These will focus on those receiving a parenting or disability allowance with the aim of getting more people back to part-time work. At the same time the bottom tax rate is to be reduced from 17 to 15 per cent from 1 July 2005. But the centrepiece of the budget is $21.7 billion in tax cuts to middle and upper income earners, built around aggressive increases in the income levels at which new tax rates take effect. This is in addition to the $14.7 billion increase announced in last year's election budget. From July 1 this year: · The 42 per cent threshold will increase to $63,001. · The 47 per cent threshold will increase to $95,001 (compared with $80,001 announced last year). From 1 July 2006: · The 42 per cent threshold will increase again to $70,001. · The 47 per cent threshold will increase again to $125,000. Coupled with the drop in the lowest rate, this will generate tax cuts of between $6 a week for those on average earnings ($50,000) up to $87 a week for those with a taxable income greater than $125,000. Other key features of the budget are: · A budget surplus (cash balance) predicted for 2005-06 of $8.9 billion. · Forecast growth of 3 per cent for 2005-06, up from 2per cent this year. · Unemployment to reach a 28-year low, equal to 5 per cent. · Government debt to reach a record low of $6 billion. Other main initiatives are: Health · An increase of up to a $1000 a year for carers. · New cancer screening and awareness program ($196 million). · A $25 million campaign to stop youth smoking. · A package of measures worth $321 million to help dementia sufferers and their carers, including 2000 new aged care at home places. · Funding for latest chickenpox and polio vaccinations ($139 million). · Changes in safety net provisions to limit overuse of prescription drugs. Welfare · $3.6 billion package to improve incentives to work for single parents, older workers and future disabled. This includes $2 billion to help welfare recipients find and keep a job. Business · From tomorrow, removal of the 3 per cent tariff on imports where no substitutes are made in Australia. · Tax relief for a range of "blackhole" expenses not recognised by the Tax Office. · Aligning capital gains tax treatment for non residents and allowing foreign tax losses to offset domestic income as an incentive to establish regional headquarters. · A $37 million agreement to continue funding of the business entry point website. · $6 million dollars to improve export opportunities in the US. Employment · Funding for 11,500 new trades and apprentice-based training. · An increase in skilled migration places by 20,000. Future · Creation of a special fund to help pay for future liabilities such as public sector superannuation. Security · Iraq commitment of $511 million for four years. · Increased security for overseas diplomats and missions ($522 million). · Enhanced border protection and new passport technologies ($226 million). · An extra $240 million to strengthen intelligence capabilities. |
