Finance

Budget 2014: Debt levy and increase in fringe benefits tax confirmed for high earners

Cara Waters /

The government has confirmed the introduction of a three-year temporary “debt levy” on those who earn over $180,000 a year. 

The levy will apply at a rate of 2% on the highest income tax rate, which will affect around 650,000 taxpayers on incomes above $180,000.

The levy is expected to raise $3.1 billion over a four-year period. 

The government will also increase a number of other taxes that are currently based on calculations that include the top personal tax rate. 

The budget papers say this increase is aimed at preventing high-income earners using fringe benefits to avoid the levy.

The fringe benefit tax rate will be increased from 47% to 49% from 1 April 2015 until 31 March 2017.

The debt levy is one of the more controversial measures to be included in the budget, with accusations the government has broken pre-election promises not to change existing taxes or introduce new taxes being hurled at the government, even from within its own ranks.

Introducing the levy in his budget speech, Treasurer Joe Hockey said “tonight we are asking higher-income earners to help repair the budget.”

“It is only fair that everyone makes a contribution.”

It is unclear whether Hockey will be able to get the debt levy through the Senate, with the government now needing the stamp of approval from Labor and other minor parties, including the Palmer United Party.

Christine Milne, leader of the Greens, said in a statement yesterday the proposed temporary increase to the highest marginal personal income tax rate was “nothing more than a ploy”.

The Greens say the budget burden is being unfairly borne by low-income earners who are having permanent measures imposed while the debt levy on high-income earners is only temporary.

However, Milne said the Greens would consider supporting “permanent increases in taxes on the wealthy if the Abbott government wants to get serious about progressive structural tax reform”.

Despite attacking the government for breaking an election promise not to

introduce any new taxes or change existing ones, the opposition has not indicated if it will support the changes to personal income tax.

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Cara Waters

Cara Waters is a former SmartCompany editor. Previously, Cara was a senior reporter for the Financial Times' website and worked for The Sunday Times in London.

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