Furious Friday

Do you work full time? Are new tax cuts only going to the “top end of town”? Is this “selling Queenslanders out”?

Welcome to Furious Friday… The Tax Bill has Passed…Yay!

Now, let’s clear up a little misconception floating around, we’re going to talk about the Robocall that was made to a lot of Queenslanders.

I wasn’t “lucky” enough to get one of these calls, but I can just imagine it was the same voice that does all the smear campaigns. It said:

“Right now, in Canberra, Pauline Hanson plans to vote with Malcolm Turnbull to give another tax cut to the top end of town. She’s even giving herself a massive tax cut. But it’s not too late for us to stop her. Pauline is in Canberra right now – the final vote could happen at any minute. Press one to be connected direct to Pauline Hanson’s office to tell her yourself: Stop selling Queenslanders out.”

Questions of the day:

  1. Are these tax cuts going to the “top end of town”?
  2. And is this selling Queenslanders (and the rest of Australia as it is Federal) out?

The plan is a 6-year rollout, aimed at reducing the burden on the full-time workers in Australia due to the progressive tax policy.

Here’s a summary of the changes, courtesy of the Parliamentary Budget Office:

1 July 2018

  1. Increases the upper threshold for the 32.5% marginal tax rate from $87,000 to $90,000 (3-4% of Australians)
  2. Low and Middle-Income Tax Offset of up to $530 for individuals with taxable income up to $125,333 (Full $530 between $48-90k, reduces by 1.5 cents every dollar over $90k)

1 July 2022*

  1. Increases the upper threshold for the 32.5% marginal tax rate from $90,000 to $120,000
  2. Increases the upper threshold for the 19% marginal tax rate from $37,000 to $41,000

1 July 2024

  1. Increases the lower threshold for the 45% marginal tax rate from $180,001 to $200,001 from 1 July 2024.
  2. Removes the 37% marginal tax rate, income from $41,001 to $200,000 is taxed at a marginal rate of 32.5% from 1 July 2024.
    1. That is around 40% of Australians – Or almost every single full-time worker!

Who will receive this reduction in tax? Let’s look at the stats

  1. $81,531 average annual full-time earnings (Data Sourced: ABS)
  2. 5m Australians – 19 million Australians are over 15 years old
    • 6m are employed full time
    • 8m are employed part time
    • 800k are unemployed (looking for work)
    • 2m Not in labour force
      • About 3.5m over 65
  3. Incomes of 19m Australians of those 15+ years of age
    • 10% – No incomes
    • 31% (6m) between $12,000 and $30,000 – But these are likely those not in the work force or working part time
    • 46% above $30,000 – About 8.5m, of which 6.6m are working full time
    • 6m Australians will not have to pay the 37% tax bracket from 2022
      1. This group makes up 85% of all tax income the government receives.

The Verdict:

  1. Not much benefit for the first 4 years
  2. Small benefit to those between $50k and $90k – $530 tax offset now (4.5m Australians)
    1. By 2022 – Earning $120,000 p.a. you will have $12,220 more per annum (10% of salary)

Back to the questions

  1. Is this just for the top end? Well for those lucky people who work full time it does benefit
    • The top 30% of income tax payers who pay for 84% of the tax will get the benefits
    • So, I guess the claims are true… but it isn’t like the top 1% are the only ones getting the benefits. And they’re the ones paying a higher tax rate anyway.
  2. Is it selling anyone out? Or letting people keep what they earn?
    • When you look at it, for those not paying much tax, they don’t save much, as they don’t pay much
    • They don’t receive anything either, as it is a tax cut and not a handout.

The real benefit:

  1. Save tax – Have more disposable income
    • More to invest! – $3k to $12k for the average households incomes (about $120,000)
  2. Shouldn’t really be more to spend but either repay bad debts or increase net wealth

 

I hope this clears things up! Have a great weekend

*Yo, I said “2020” on the podcast, but I meant “2022”. Sorry!

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