Once again Peter Costello has delivered personal tax cuts in handing down his 12th Australian Federal Budget on the 8th May 2007. The reductions are worth A$31.5 billion over 4 years, on top of the A$35 billion announced last year.
This is the 5th Consecutive budget where personal Tax rates have been reduced, and although they are not as significant as the massive reductions of last year, they continue the clear message that Australia will continue to become tax friendly.
In this years budget the main focus was on the lower income levels with a shift of the 15% marginal rate upwards from A$25,000 to A$30,000, a saving worth A$750 per year to all taxpayers earning over $30,000.
In addition, a special Low Income Rebate has been increased from A$600 to A$750 and will apply in full for incomes upto A$30,000 before shading out for income in excess of this.
For elderly retirees, it will now be possible to earn A$25,867 as a single or A$43,360 as a couple, and remain tax free as a result of new measures. This is in addition to the significant overhaul of Superannuation introduced in last years budget which allows pensions and lump sums from Australian Taxed Superannuation Funds to be tax free from the 1st July 2007.
Changes were also announced for the middle and top tax brackets, although these will not come into effect until 1st July 2008. The middle bank of 40% will apply for income between A$80,000 (up from A$75,000) and the new top threshold will increase from the current A$150,000 to A$180,000.
The top threshold, now at A$180,000, is three times higher than 5 years ago, where the top tax rate started at incomes of only A$60,000.
This has made Australia much more attractive to the thousands of arriving migrants and the million expatriates considering returning to home one day.Non resident investors enjoy the same tax levels as residents with the exemption of the first two levels, as they do not have any 0% or 15% entitlement, and have a 29% rate in replace of these bands.
For overseas based property investors, there have been no changes to the method of tax calculation, so there is a continued ability to ensure no tax on property holdings through prudent planning and debt maintenance.
The A$10bn budget surplus and debt free status will no doubt allow this trend of personal tax reductions to continue into the future.
