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Budget Tax-Breaks Snakes and Ladders

By Barddylbach

Budget 2018 tax breaks smoke and mirrors – the higher incomes get the tax-breaks and the lower incomes are paying for it … and don’t forget!

The 2018 budget tax reform is all smoke and mirrors or should that be snakes and ladders! Australians are being conned into election mode and being bought-off with crumbs from the table. This is not reform, just more of the same and don’t forget the more immediate big end of town $80 billion tax cuts. The reality that no-one is reporting in the press anywhere (other than here) is that the current and flatter proposed systems are both way out of whack and unfair to lower-middle income earning Australians. Compare the three countries below: UK, Australia and New Zealand from what I can glean so far (allowing for exchange rate differences, UK equivalent dollar values given). Should raise a few eyebrows!

1) Simply put the biggest elephant in the room is that Australians earning between $37,000 and $87,000 are paying 32.5% tax compared with 20% in the UK and that is fundamentally not going to change. The threshold from 19% to 32.5% is $37,000 when the UK is double that at $83,533 and that is where the key problem is, since this captures most Australians (lower to middle income bracket). Raising it to $41,000 in 2021 is a long delay and mere tinkering, not meaningful reform.

2) Morrison/Turnbull propose to expand and flatten this basic tax rate band up to $180,000+, which means a hard-working Australian earning $45,000 (at the lower end of this huge band) will be paying the same rate (32.5% tax) as a business executive at $180,000. In the UK that ‘hard working Australian’ on $45,000 would only be paying 20% tax and the business executive would be paying 40%. So who here is missing out and who is the winner? This sound fair to you? See where Turnbull’s priority lies? Turnbull calls it fair and talks about incentives … ha ha! Try finding a job at $180,000, ordinary Australians have to make do with far less however hard they work, train and educate themselves (and that costs them a fortune too, no mention of that). So reduce the number of bands, flatten it if you like, but that bottom threshold for basic rate needs to be up around $90,000 not $37,000 or $41,000 … geez, that’s the minimum wage!

3) It shouldn’t escape your notice that the income tax threshold clicks in at $18,200, $3,000 less than in the UK, so the lowest worker and the alleged the minimum wage (many are paid below this), both pay more tax than their equivalent in the UK. In New Zealand the equivalent basic tax rate is 1.5% less at 17.5% and runs through to $48,000 ($11,000 higher). And the next rate of tax is 2.5% less at 30% up to $70,000.

4) Turnbull’s notion of incentive only applies to a limited number of middle incomes immediately breaking the $87,000 threshold, but it is marginal because all you earn under that would be at the lower rate of 20% (not 32%) if you were in the UK. So it is more important to shift that threshold up than reduce the rate of tax.

5) UK top tax is the same rate (45%) but note the threshold is significantly higher, which means there is no difference at the top level, just that in Australia higher rate tax clicks in at lower thresholds. New Zealand are very generous on the rich at 33%, however at a threshold of $70,000 are paying significantly less tax at this level. But remember when you are earning at this top rate $180,000, $270,000 or more, it makes little difference to your life style paying 45% tax on income above the threshold pretty much wherever it falls, unless you count the difference between one mansion and two; a BMW or roller, a tropical island in the South Pacific, your very own printing press or a modest financial institution private debit card and debt collection company. You are going to put your investments and new earnings offshore or not pay tax at all as they do at the big end of town.

6) Of course, no mention and no change to the relentless Liberal and National war on the poorest, youngest, unemployed, under-employed Australians, straddled between Centrelink, the Indue cashless welfare card and oblivion. $40 per day Newstart no change and pensioners 60+ can look forward to practically nothing if they lose their job or become unwell, least until they are 70; enjoy with a few years tread to go before you die. That’s the life unless you are a member of Parliament and then you have super-economic powers to live like a Lord, but I think that is more to do with privileges, parliamentary wages, expenses, allowances, pensions and private business interests than $40 a day budgeting skills or perhaps it is an Australian super-hero’s delusion … Get back in your cage!

7) Don’t forget the multibillion dollar tax give away to big business, big end of town. Malcolm is hoping you have forgotten that already…. Oooops and don’t forget the multibillion dollar tax give away – Oh stop it!

Compare the three:
UK
Band Taxable income (Up to) Tax rate

Lowest rate <$21,356 (£11,850) 0%
Basic rate <$83,533 (£46,350) 20%
Higher rate <$270,355 (£150,000) 40%
Top rate +$270,355 (£150,000) 45%

AUS
Band Taxable income (Up to) Tax rate

Lowest rate <$18,200 0%
Basic rate <$37,000 19%
Higher rate <$87,000 (to be 180,000) 32.5%
(to be deleted <$180,000 37% )
Top rate +$180,000 45%

NZ
Band Taxable income (Up to) Tax rate

Lowest rate <$14,000 10.5%
Basic rate <$48,000 17.5%
Middle rate <$70,000 30%
Higher rate +$70,000 33%
Top rate No notification 48%

Fraudsters Morrison and Turnbull, stitching up the budget, stitching up the electorate, conning ordinary Australians with crumbs from their table, a lot of salience bias, dressing, Liberal navel gazing – snakes and ladders.

Now what mustn’t I forget?

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15 comments

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  1. Jaquix

    Fraudsters indeed. Total conartists and so full of their own importance. Independent Australia has a great Editorial out describing Morrison in pig/pork/bacon type terms. The more everyone looks at it, the worse this budget looks. BCA Jennifer Westacott thrilled on behalf of her 130 big business members (Qantas, 4 big banks, Goldman Sachs, Rio Tinto, etc) so that tells you something.

  2. Shevill Mathers

    Totally a vote chasing pre-election budget. Does nothing for low end of town, those not working because too many applicants for each position advertised and maybe only 1 in 200 get the job, cheaper for business to import lower paid 457 Visa workers than restart, Tech Colleges, TAFE, and Apprenticeships. This government is down nothing to build any in-house training schemes. They are a total waste of space and gobble up taxpayer monies to support a lifestyle they have become accustomed to, both during their employment as well as a very well paid retirement with all its public funded perks and so called entitlements.

  3. New England Cocky

    Another policy from the 1980s from the late Joh Bjelke-Petersen, former Queensland Premier (Notional$ Party), that was howled down by conservative commentators on MSM when first proposed as a flat tax of 2% on gross earrings for individuals.

    But wait a minute, there may be something useful here …. how about we have a flat corporate tax rate of 30% on gross earrings after deducting only wages and property rents plus eliminate all tax concessions, allowances, rebates and other inducements to tittilate and maintain the accountancy industry? Simplify the taxation laws and regulations so that a “normal person” can understand the plain English legislation

    Think of the savings in sending tax accountants out of business.

  4. townsvilleblog

    The $10 a week drip feed increase in take home pay for the huge majority of the workforce, shop assistants (job titled Dept Managers) clerks, storespeople, service station attendants etc will only just cover the rise in the price of petrol for their cars that they must run to get to work. Unlike small and large businesses, they can’t claim their petrol money on their tax, those who can in my opinion are parasites!

  5. guest

    Turnbull is trying to buy his PMship as he did before the last election with $1.75m. Now he is so desperate he is trying to use millions of dollars of surrendered tax money to achieve the same result. Is he worth it?

  6. Kronomex

    Anyone want to bet that Malcontent will make a another generous tax dodge…oops, “donation” again?

  7. flogga

    15% and 20% GST in NZ and UK respectively … need to compare apples with apples – ie the total tax that each individual pays. We don’t need comparisons to see how poorly structured Australia’s tax rates are … these comparisons are themselves smoke and mirrors.

  8. helvityni

    Guest ,you said what I was going to say, pay big money to get there , and to stay there….maybe it buys happiness as well, after all he has said that he is the happiest PM…

  9. Matt Gibbins

    There is much to be concerned about the Coalition’s budget. Especially as it reflects prioritising the wealthy.
    However, the article contributes to the confusion between effective tax rate and the rate at each band.
    The table below shows the effective tax rates within income bands from the 2017-18 tax schedule to that proposed in the budget. Note that the effective tax rate on $45,000 for 2017-18 is 13.72%.

    Annual tax Effective Efective
    by income tax rate tax rate proposed schedule

    TAXABLE 2017-18 2017-18 2018-19 2022-23 (P2) 2023-24 (P2) 2024-25 (P3)
    INCOME
    $20,000 $342 1.71% 1.71% 1.71% 1.71% 1.71%
    $30,000 $2,242 7.47% 6.81% 6.81% 6.81% 6.81%
    $40,000 $4,547 11.37% 10.64% 10.23% 10.23% 10.23%
    $50,000 $7,797 15.59% 14.53% 14.51% 14.51% 14.51%
    $60,000 $11,047 18.41% 17.53% 17.51% 17.51% 17.51%
    $70,000 $14,297 20.42% 19.67% 19.65% 19.65% 19.65%
    $80,000 $17,547 21.93% 21.27% 21.26% 21.26% 21.26%
    $90,000 $20,932 23.26% 22.52% 22.51% 22.51% 22.51%
    $100,000 $24,632 24.63% 24.12% 23.51% 23.51% 23.51%
    $120,000 $32,032 26.69% 26.51% 25.01% 25.01% 25.01%
    $140,000 $39,432 28.17% 28.07% 26.72% 26.72% 26.08%
    $160,000 $46,832 29.27% 29.19% 28.00% 28.00% 26.88%
    $180,000 $54,232 30.13% 30.05% 29.00% 29.00% 27.50%
    $200,000 $63,232 31.62% 31.55% 30.60% 30.60% 28.00%

  10. Jon Chesterson

    Shorten’s reply –

    Back on track for most Australians because we are not going to waste $80 billion on corporate tax cuts for the big end of town. I take it that is a resounding NO to the Liberal budget omnibus, to the blackmailing Liberals, a BIG NO and the Liberal budget won’t get up…

    Great speech when you see how frozen solid the Liberal end of town were looking. Looked like bankrupt stunned mullets and so they should be.

  11. Jon Chesterson

    Shorten’s reply –

    Would have been even better if he had underpinned the benefits of funding the common good by Modern Money Theory – the Federal Government is the sole issuer of the Australian Dollar and can issue as much money as the country needs for universal healthcare, better public schools, free education at TAFE and University, national job guarantee, universal basic income for those unable to work, building national infrastructure, a declaration (a bill) of social and economic rights for all Australians. Liberals have grasped this but instead choose to keep Australians in the dark and spend it on the big end of town before the people get wind of it that MMT is the funding tool not tax. This surely is what drives the progressive politics and speeches of Sanders and Corbyn.

    Imagine if the three of them all got in next time round, we might finally see an end to neoliberalism.

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