Ah yes, it's that time of the year again — where consulting firms dust off their trusty budget models and everyone has a laugh at budget surplus projections at the expense of poor Treasury analysts (forecasting revenues is hard work, so I'm told).
Let's also consider for a second how at this time of the year, numbers seem to lose some of their weight, becoming important only relative to the spending on things we care about. But I digress.
It's hard to make anyone care about budgets, and this one is no different, but bear with me and together we'll wade through the details on the government's (likely) final budget before the election.
The highlight was the tax cuts, and I suspect that we'll be talking about them for a while, partly because the government might not be able to pass the legislation. The government's personal income tax plan, like most wellness programs, is a three-step process.
The first step is tax relief to low and middle-income earners through the low and middle income tax offset (in addition to the existing low income tax offset). The offset will benefit households earning $37,000 or less a year by up to $200, and up to $530 for those earning between $37,000 and $48,000. For those earning between 48,000 and 90,000, there's a maximum of $530 on the table — about 147 coffees at a mid-priced cafe in Melbourne.
Addressing the frequently lamented issue of bracket creep — where increases to wages through inflation pushes people into higher tax brackets — the government will increase the top of the 32.5 per cent threshold from $87,000 to $90,000 from July 2018. Changes to the low income tax offset from July 2022 will also ensure that those earning between $37,000 and $67,000 will see their take home pay increase.
As for step three, the government is opting for a flatter system of personal income taxation whereby they will be removing the 37 per cent bracket, so those whose earnings exceed $120,000 and earn up to $200,000 face a marginal tax bracket of 32.5 per cent. These measures are expected to cost the government budget about $13.4 billion over the forward estimates.
"It won't actually save accountholders that much in terms of fees — but it is good optics for the government."
Analysts generally don't pay much attention to figures shown beyond the forward estimates (the next four financial years), as there are too