Continuing personal tax reform

Over the last three years, low income earners have enjoyed substantial decreases in income tax.

Since 2004-05:

• The first marginal tax rate has been reduced from 17 to 15 per cent
• The 30 per cent threshold has increased from $21,600 to $30,000
• The Low Income Tax Offset has increased from $235 to $750.

The combined effect of these improvements mean that taxpayers earning $15,000 a year will have had their income tax more than halved between 2004‑05 and 2007‑08.

The income tax cuts announced in this budget ensure that over 80 per cent of taxpayers will continue to face a top marginal tax rate of 30 per cent or less.

The increase in the top tax threshold to $180,000 further improves Australia’s international tax competitiveness. In 2008-09, Australia’s top threshold, relative to an average wage, will be the eighth highest in the OECD, compared to twentieth in 2004‑05.

From 2008-09, the top marginal rate will apply to around only 2 per cent of taxpayers.

In addition, the Government will provide the Australian Taxation Office (ATO) with $20 million to make it easier for taxpayers to complete their tax return. This will be available to around 9 million taxpayers who lodge returns electronically, either themselves or through an agent. From 2007‑08, the ATO will pre-fill returns with information including salary and wages, interest, dividends, information on private health insurance and any benefits paid from the Government, including family tax benefit.