I watched Scott Morrison hand down the 2018 budget live on Twitter last night, it was pretty cool I must admit. I think the viewer count got to around 1,500 people, maybe more, I can’t recall precisely. What even cooler was watching the comments being posted as the budget was being handed down…all on the same screen. Welcome to the future folks.
Here’s my take on Mr Morrison’s third budget, which seems as though it was designed to ensure he has a forth:
1. Tax Cuts
This was the centerpiece for the 2018 budget. A seven year plan to lower, and simplify income tax. From July, those earning up to $37,000 will have their tax reduced by $200. The offset will increase up to a maximum of $530 for those earning $90,000. The benefit gradually decreases to zero at a taxable income of $125,000.
The Government wants to combat bracket creep. The 37% rate won’t kick in until people start earning $90,000, instead of the current $87,000, with the threshold rising to $120,000 in 2022-23. The next year, the 37 percent bracket will be abolished completely. With a top personal tax rate of 45% kicking in after $200,000 from July 2024.
Here’s what the tax rates will look like over the next seven years:
Here’s the debate on Twitter:
Person A earns $45K, pays $14,625 tax (32.5%)
Person B earns $200K, pays $65,000 tax (also 32.5%)
Person B will always pay more tax because their salary is higher. Doesn’t sound radical, sounds like equality. Your bio states that you are “all about equality” then why not here?
— Timothy Jolly (@TimothyJolly_) May 8, 2018
The marginal tax rate of 45k would be far less as you still have a tax free threshold. As a percentage it is around 40% of the salary. At an income of $180,000 this is substantially lower as a percentage. Meaning the tax rate of a 45k would be around 15% rather than 32.5%.
— Jack (@Jack46499751) May 8, 2018
I think we can always compare one thing to another, however if we look at what the simplification is designed to do, it should mean that 94% of Australian tax payers will pay no more than 32.5 cents in the dollar. Surely that’s a good thing?
2. Surplus, surplus, surplus
The Government is forecasting a $2.2 billion surplus in 2020FY, which would be the first since the global financial crisis. Some of the assumptions that are being used however, seem to be a little on the optimistic side. Time will tell I guess.
Superannuation made it into the budget again, but not in the way it has in the past.
Exit fees on all superannuation funds will be banned. A subtle but bold move. Good one ScoMo.
Account with a balance of less than $6,000 will have a maximum fee cap of 3%. Although I reckon 3% is absolutely ridiculous. It’s a start nonetheless.
You know all that lost super you have. Well, the ATO will be given the powers to track down funds with balances less than $6,000 and reunite them with you active accounts. Hopefully one less headache for you. Thanks ScoMo.
4. Roadworks Ahead
Infrastructure is back on the cards, again. The Government is allocating $24.5 billion for new projects to help ease traffic congestion. This includes the long awaited Melbourne to Tullamarine rail line, which has $5 billion allocated to it.
If you think this is all a done deal, just cast your mind back to December 2015, where the East-West Link cost tax payers $1.1 billion to scrap the project. Most of the big projects require the states to kick in half the money, so not sure how this one’ going to go down.
It kind of reminds me of the 90’s arcade game, Street Fighter.
I’d love to see constant progress with infrastructure, as I truly believe it’s key in allowing Melbourne to compete on so many fronts, as well as help with the housing affordability issue. Anyway, don’t hold your breath on this one (although I am crossing my fingers).
5. Beer will be cheaper
Craft beer that is. From July 1, 2019, concessional draught beer excise rates will apply to smaller kegs typically used by craft brewers, making craft beer cheaper. On ya ScoMo.
Here’s a neat little summary by the ABC, Budget 2018: Winners and losers
If you want to know how the tax changes impact you, here’s the calculator that will work it out for you.
As always, we’ll know more as the details are revealed and clarified. Here’s the budget overview if you’d like to know more.