Budget 2014: debt levy could hit 650,000 Australians; Abbott prepares $10 billion infrastructure fund

Just days out from the Abbott government’s first budget, new reports about the so-called debt levy suggest the tax hike could be targeted at Australians earning above $150,000 each year.

As SmartCompany reported last week, the government was initially said to be considering a 1% pre-tax levy on the pay of people earning more than $80,000 a year, rising to 2% for those earning more than $180,000.

However, Fairfax reports today the threshold could be set at $150,000, with taxpayers earning above this amount charged an additional 1%. According to research from the National Centre for Social and Economic Modelling this would affect 650,000 people, or 7% of taxpayers, and raise $700 million a year.

Setting the levy at the higher threshold of $150,000 would spare middle income earners, who are likely to be affected by proposed changes to welfare payments.

According to another Fairfax report, the federal cabinet signed off on the debt levy on Wednesday despite not knowing the final rate or threshold, which will be revealed when Treasurer Joe Hockey delivers the budget on May 13.

Meanwhile, Prime Minister Tony Abbott has reportedly set aside $10 billion to spend on infrastructure in the budget, with large-scale projects in Melbourne and Sydney to receive federal funding.

Fairfax reports around $5 billion will be linked to Hockey’s plan to encourage the state governments to privatise assets in return for bonus payments from Canberra, while Melbourne’s East West Link and Sydney’s second airport at Badgerys Creek are slated to receive additional funding.

The budget leaks come at the same time as confirmation from Hockey that apart from GST revenue, the government has seen no material improvement in revenue or growth forecasts since its mid-year economic update in November 2013.

“The revenues are pretty much flatlining [and] there’s no dramatic movement,” said Hockey, adding it will be at least two years before economic growth returns to a trend rate of between 3-3.25%.


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