As noted earlier, the Coalition announced on the 2nd of April that it had delivered a budget surplus for the first time in 12 years supported by stronger iron ore and coal prices as exports continue to grow.
As the Federal Government is seeking re-election it was unlikely that any major changes would be proposed, and as expected most announcements were centred around tax cuts and reform to the marginal tax rate system with a view to increasing after tax pay for low and middle income earners. This was achieved by extending the Low and Middle Income tax Offset to those earning up to $126,000 and increasing it to $255 for those below $37,000 and $1,080 for those below $90,000 in annual salary.
This was combined with an increase in the income thresholder for the 19% tax bracket to $45,000 in 2022 and the reduction in the 32.5% bracket to 30% in 2024. There is no doubt this is a positive for lower income households with more money immediately into their pockets, yet the media coverage was focused on the potential $11,000 tax reductions for those earning over $200,000. Unfortunately, it seems that those covering the changes seem to ignore the fact that these people pay at least $60,000 to $70,000 in tax each year.
There were limited changes to superannuation, as the previous $1.6m cap was a key driver of the Coalitions poor showing at the last election. With some small proposals including the following:
- Allowing SMSF trustees to choose their preferred calculation to determine their tax exempt component;
- No longer requiring an actuarial certificate where the entire SMSF is in pension mode;
- Bringing the requirement to meet the work test in line with the Age Pension Age, moving to 66 immediately and 67 in 2010;
- Increasing the age limit for spouse contributions to 74.
In general, it was a positive budget with a focus on both winning votes but not losing its core constituency. Given the size and scale of the Labor Party’s tax reform and the unfortunate timing as the property market continues to fall, it would seem this election could be closer than many expect.