On the 1st July 2006, history will be made in Australia as for the first time ever the top marginal tax rate will only apply to incomes in excess of $100,000. In fact the jump is so large from the previous A$95,000 top bracket that the new threshold will be A$150,000.
The top tax rate has also been reduced from the previous 47% to 45%.
This may still be considered high by international standards, however you must consider the pace of this change sweeping Australian Tax Reform.
As recently as 30th June 2003, the top threshold was only $60,000 and taxable income above this was taxed at 47%. In three short years we have seen this move to A$150,000 and tax at 45%. This is a lift of 250% in the top tax bracket.
It had been announced in last years budget to increase the top threshold to $125,000, so they have managed to tax it even further then initially expected.
This trend is expected to continue with the Australian Government now debt free and in consistent surplus, so we can look forward to continued improvement in Australia’s personal tax rates.
For the first time, Australia will actually be under the OECD Average for tax, an important barrier that the Howard Government was keen to break through.
For many years, fear of tax has been a major factor in so many Australian’s choosing to work abroad and many foreigners deciding to delay their arrival as Australian migrants.
This change is no doubt aimed at relieving that fear and encouraging people to return and migrate to Australia to continue to support the steady growth in the economy.
It is also welcome news to all Australian taxpayers, as the tax reductions also help with reductions at all income levels. The Australian Government believes that now almost 80% of all Australian taxpayers, will be on a tax rate of 30c per dollar or less as a result of the rate changes.
This could also be very good news for property markets across Australia as higher disposable incomes will be welcomed by households giving them more funds to improve living standards with higher rents or mortgage payments, thus allowing an upgrade on their current circumstances.
For overseas property investors and expatriates, the changes will have a minor impact as the starting rate of 29% remains in force on Australian sourced income. However, the many tax incentives offered to overseas based property investors will continue to ensure that tax free property investment remains achievable with prudent planning.
You may also want to view our Members Only Special Reports section which has more in depth articles on this topic.
