Work incentives with income tax reform

This budget significanly restructures the personal income tax system to increase disposable incomes, enhance incentives for participation and to improve Australia's international competitiveness.

From 1 July 2006:

• The 30 per cent threshold will be raised to $25,001
• The 42 per cent marginal tax rate will be cut to 40 per cent and the threshold will be raised to $75,001

• The 47 per cent marginal tax rate will be cut to 45 per cent and the threshold will be raised to $150,001
• The Low Income Tax Offset (LITO) will be increased to $600 per year and phase out from $25,000, up from $21,600.

Those eligible for the full LITO will not pay tax until their annual income exceeds $10,000 per year.

Senior Australians who are eligible for the Senior Australians Tax Offset (SATO) will now pay no tax on their annual income up to $24,867 for singles and up to $41,360 for couples.

The Fringe Benefits Tax rate will be cut to 46.5 per cent.