Treasurer Wayne Swan has delivered on the Rudd Government’s promised tax cuts as part of a $55 billion package for its core constituents, working families.
The tax cuts, worth $46.7 billion over the next four years, will cut the tax paid by a worker on $80,000 a year by $21.15 per week from July 1, 2008. That saving will rise to $24.04 on July 1, 2009 and $29.81 on July 1, 2010.
In an additional move designed to encourage parents back into the workforce, the tax cuts will allow workers to earn by to $14,000 in 2008-09 without incurring a net tax liability, up from $11,000 in 2007-08. The government says that by 2010-11, a typical second-income earner will be able to work 14 hours per week without paying tax. “For too long, working families have watched the proceeds of the boom directed elsewhere, in the form of tax cuts skewed to those already doing well. Tonight we tip the scales in favour of working families,” Swan said.
As promised, the government has increased the Child Care Tax Rebate from 30% to 50%, with the annual cap increased from $4354 to $7500 per child. The rebate will also be paid quarterly.
There is also $4.4 billion for the Education Tax Refund, under which parents will be able to claim a 50% refund on eligible education expenses – up to $375 million for a primary school child and up to $750 for a secondary school child each year.
The Government has followed through on its promised housing affordability package, with $1.2 billion for its first home savers accounts, which will help first home buyers save in a more tax effective way. The National Rental Affordability Scheme, which was also foreshadowed in the election, has also been established at a cost of $623 million over four years.
As foreshadowed a few days before the budget, the government will also increase the income thresholds for the Medicare Levy Surcharge from $50,000 a year to $100,000 for singles and from $100,000 to $150,000 for families.
That’s the good news. But for those families earning more than $150,000, there’s some bad news too. From January 1, 2009, the baby bonus will be means test to make families earning $150,000 ineligible.