Federal treasurer Joe Hockey has unveiled an ambitious plan to slash personal income tax in a bid to incentivise entrepreneurship and drive economic growth.
Hockey announced his plan to take personal income tax cuts to the next election in a speech to the Tax Institute and Charted Accountants this morning.
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The Treasurer believes both the $80,000 and $180,000 income tax bracket thresholds should be raised, according to The Australian.
“The government is committed to reducing income taxes,” Hockey said.
“All the evidence points to the need for this. If we want stronger growth, this is the path we must be prepared to take. But we still have a budget to balance – we still have a budget to repair… it will be managed through continued discipline on spending decisions.”
The Treasurer has had personal income tax on his agenda for some time, arguing earlier this month vital services are at risk if enough people slip from the top income tax brackets due to economic downturn.
The top 10% of taxpayers pay almost half of all income tax collected by the government.
Last year the government raised $185 billion from personal income tax.
Peter Strong, chief executive of the Council of Small Business Australia, told SmartCompany the announcement is good news for small business.
“It will benefit the individuals of small business as the average income of a small business owner is the average income of everyone else and all of them pay their income tax through their personal income,” Strong says.
“It’s a benefit to us as we’ve got the small business tax cut and now they’ve already announced cutting personal tax.”
Strong says it good to see the government announce so many policies for business this far out from the next election.
This is because small business owners are after certainty, according to Strong.
“That’s what we’ve been looking for all along,” he says.
“There have been good policies by Frydenberg and Billson – let’s talk policy, economy and common sense.”
However Strong says small business owners will also be questioning why the government is cutting taxes when there has been so much talk of a frugal budgetary environment.
“If you’re dropping personal income tax and you’ve got a deficit, the money has to come from somewhere,” he says.
“It brings up the issue of [broadening] the GST again – no doubt about that.”
The next federal election is due in the second-half of 2016.