Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Hansard source

I thank Senator Scullion for that very timely question because last week the Senate passed the legislation to give effect to the personal income tax cuts, which formed the centrepiece of our last budget just a month ago. Taxpayers can now look forward to 1 July, which is just 10 days away, when the tax cuts come into effect. From 1 July, the top marginal tax rate falls from 47 per cent to 45 per cent and the 42 per cent rate will fall to 40 per cent. The thresholds at which these top two rates take effect will be raised. For the top rate, it will rise from $95,000 to $150,000, and the threshold for the 40c rate rises from $63,000 to $75,000. Most importantly, for many middle-income earners, the threshold for the 30c rate will rise from $21,600 to $25,000. That, of itself, will generate a tax cut of just under $10 a week for anyone earning above that $25,000 threshold.

These cuts are not just beneficial to Australian families; they represent important structural reforms to our tax system. The cuts in the top two rates help improve Australia’s competitiveness in the world market for skilled workers in which we have to be competitive. The increases in the thresholds will mean that 80 per cent of Australian taxpayers face a marginal rate of no more than 30c in the dollar, and just two per cent of taxpayers will be in the top rate of 45 per cent. That helps boost incentives for middle-income earners to enhance their skills, seek higher incomes and provide better for their families.

The tax cuts are fair. Low-income earners will benefit from an increase in the low income tax offset from $235 to $600, which provides an effective tax-free threshold of $10,000 for low-income earners, meeting one of the objectives of the Democrats, who have often been in this place talking about the tax-free threshold. So the biggest percentage tax cuts in this package will in fact flow to low-income earners. This is part of a succession of tax reforms that this government has been responsible for.

We cut personal income tax substantially in 2000 when we brought in the GST and then, again, in the 2003, 2004 and 2005 budgets and now again in 2006. Back in 2000, the top marginal tax rate cut in at incomes above just $50,000. That will now be $150,000. The lowest tax rate back then was 20c in the dollar. Now it will be 15c. The revenue forgone as a result of these tax cuts over the last four budgets amounts to $20 billion per annum.

As Senator Scullion noted, we have also made improvements to the family payment system. In 10 days time, from 1 July, families will benefit from an increase in the income range over which the maximum rate of FTBA is payable, benefiting almost half a million families with increased payments of up to $9.62 a week. The large family supplement will be extended to families with three children. Previously it was only available to those with four. As a result of these changes, a single income family with three children and an annual income of $40,000 will be no less than $40.63 a week better off. From 1 July, the maternity payment will rise from $3,000 to $4,000.

The combination of tax cuts and increased family payments, on top of the benefits from low interest rates, low inflation, rising real wages and a 4.9 per cent unemployment rate, are delivering enormous benefits to Australian families. They are a result of the very strong economic management we have brought to this country. We have returned the budget to surplus, enabling us to deliver substantial tax cuts, which will be delivered in 10 days time.