FatCat.com.au

RSS

Friday

July 20, 2018 | 07:26 AM
Go


Your Money

02.07.2018Confused about tax changes? How the recent budget will affect taxpayers

While on the surface tax cuts may seem like a universally fantastic thing, they often present a more thorny issue. With that in mind, then, here's a quick breakdown of exactly how the changes to the system stand to benefit ? or harm ? your family's w


While on the surface tax cuts may seem like a universally fantastic thing, they often present a more thorny issue. In many ways, tax is a classic case of “robbing Peter to pay Paul”: when somebody wins from a tax cut, somebody else loses out from a spending cut – or they lose further down the line as a result of increased state borrowing.

So when in last month’s budget the government announced changes to the tax system spanning the next seven years, the question of whether or not an individual taxpayer would benefit depended in large part on exactly what that taxpayer’s personal circumstances were. With that in mind, then, here’s a quick breakdown of exactly how the changes to the system stand to benefit – or harm – your family’s wallet.

Low earners

Despite a raging debate over exactly who the Turnbull government’s budget was going to benefit, the statistics do indeed show that there’ll be a headline cash saving for those on low incomes as a result of the budget. For a taxpayer with annual earnings of $37,000 or lower, the overall tax burden next year will drop by $200 – and while this may not seem like much for a family struggling to make ends meet on a daily basis, it does mean more cash in the pockets of low earners.

But whether or not a budget gives a fair share of tax savings to low earners isn’t just dependent on how much cash they stand to save. It also depends on whether taxpayers in other brackets are going to benefit or lose out, too – and figures from Labor’s Senate leader, Penny Wong, suggest that actually over 60% of the tax cut benefits were headed to those on much higher earnings. Of course, while it’s always going to be the case that lower earners will experience smaller savings, it’s as a proportion of overall income that the imbalance may appear.

Up the scale

As is quite common with budgets, the situation becomes a little more complex as the focus goes further up the earnings ladder. Those earning $40,000 will see some decent tax cuts over the coming years: while the savings will sit at just $290 in 2018-19, they are set to rise to $455 per year by 2022-23. But those who are slightly higher up when it comes to earnings are likely to be disappointed. For those earning $60,000, for example, the annual saving in 2018-19 will be $530 – but this will rise by just ten dollars to a $540 annual saving in 2022-23.

An eye on the future

As is always the case with budgets, everyone is at risk of numbers overload. As a result, figures which cover the short term often get prioritized in the media over long term ones. But the 2018 budget revealed some very interesting statistics on how the tax system is going to change in the future – and it’s here that high earners will really cash in. In the 2018-19 financial year, for example, those earning $150,000 or more will get an annual cut of just $135. But by 2024-25, the plan means they’ll be getting a much higher saving of $3,375 and those on $200,000 or more will get an even larger saving of $7,225 by then.

No budget was ever known for being simple and this most recent one is no exception. While there are some clear benefits to low earners in this budget, it’s also apparent that higher earners also stand to cash in, especially over the course of the next few years. But a week, as they say, is a long time in politics and it may well be that the situation looks different by the time the next budget in eleven months or so rolls around.


Top Stories on FatCat.com.au

06.01.2014
When To Start A Business? Go With Your Gut. Every aspiring entrepreneur seeks an answer to this million dollar question, but the answer lies within.

News from TheBull.com.au


© Copyright 2018, FatCat.com.au. All right reserved.