Within a day of announcing that Australia would go to the election booth on November 24th, the Howard government went straight to the big guns and announced another significant tax reduction program if re elected, worth A$34 billion
The one thing we know for sure on this election promise, is that it will be delivered, as the Howard Government has consistently reduced taxes throughout the past 5 years.
In 2006, Australia became debt free as a Government for the first time, and as he has been able to maintain Budget Surpluses each year, he is in an enviable position of being able to fully fund the ongoing tax reduction without blowing his budgets.
The only catch for these proposed tax reduction is that John Howard and his team need to win the Federal Election on the 24th November in order to bring them into play.
This will be no easy task as the Liberal Government has a lot of ground to make up on the opposition in the polls, but Tax is a key personal issue affecting all Australians and could be the issue that can sway the polls back in to the favour of the Howard Government.
It is proposed to keep increasing the lower income rebates, to effectively mean that incomes of less than A$14,000 pa will have no tax payable at all next year, lifting to A$20,000 within the next 5 years.
The current 15% tax rate band will be extended to cover incomes of up to A$37,000, while the top tax rates will be reduced from 45% in the highest band to 42%, and the current 40% rate dropped to 37% from 1st July 2010.
The commitment given by Treasurer Peter Costello is reduce the top tax rate to 40% over the coming years, most likely to be by 2013.
No doubt opposition leader Kevin Rudd will counter with his own tax carrot for the voters, but he will fund it difficult to match the offer on the table as he will have to fund his other election promises and may fall under more scrutiny as his party does not have the historical credibility of the Howard Government’s continual tax reduction past.
Regardless of who wins the election, we can look forward to future Governments continuing to bring down personal income tax rates to more acceptable levels.
Tax has long been the main driver of expatriates heading overseas and migrants thinking twice about Australia as a destination, but with the reductions over the past 5 years and the promise of more to come, Australia is fast becoming a tax friendly environment.
With the recent changes to Superannuation ensuring a tax free retirement in Australia is now very easily achieved, making it perhaps the best retirement destination in the world when you combine lifestyle advantages, modern conveniences, safety, health and tax cost.
Fifteen years ago, we certainly could not have said that.
It will be very interesting to observe the expatriate community in the coming years to see at what point the coming tax reductions will be sufficient to lure us back home.
The continuing lack of tax deduction on our private mortgage’s in Australia, will mean that it is still best to remain overseas until you have saved enough to return to Australia debt free on your intended home, but the incentives to go home just keeps getting sweeter.
