Did we expect an easier ride from an election year budget? Yup. And we got it. The 2017 Budget’s bottom line is to boost spending, ease taxes and give some extra legroom to our growing population and economy.
The Budget combines tax breaks for working families with support for innovation and investment in business. The surplus predicted is largely earmarked for capital spend on infrastructure and there’s an intention to keep cutting back our net debt.
Business owners may see new opportunities, particularly in the emphasis on innovation and infrastructure, but they’ll have to make their own luck and keep those wheels turning.
A FAMILY SHOW
The early hints of tax relief for families have been fleshed out in the Family Incomes Package which will take effect from 1 April 2018. The legislation giving the changes effect was passed by Parliament the Friday after the Budget was read and at time of writing awaits Royal assent.
TAX BRACKETS
There’s a broad recognition that while the average wage has risen, the tax rates haven’t flexed to accommodate it. Moves into a higher tax bracket bit into wage rises for lower and middle income families. The Government aims to tackle this by stretching the lower tax brackets. From 1 April 2018, the $14,000 income tax threshold will increase to $22,000 and the $48,000 threshold to $52,000.
The tax rates aren’t changing but the points where they cut in are changing (though there’s no change for the top tax bracket). If you were earning $22,000 a year, you receive a $560 tax saving each year; if you were earning $52,000 a year, it’s an annual tax saving of $1,060.
Tax Rate Current Bracket New Bracket
10.5% $1-$14,000 $1 - 22,000
17.5% $14,001-$48,000 $22,001 - 52,000
30% $48,000 - 70,000 $52,001 - 70,000
33% $70,000+ $70,001+
FAMILY TAX CREDIT
Balanced against the changes to the tax thresholds are changes to the Family Tax Credit. The abatement threshold will decrease from $36,350 a year to $35,000 and the abatement rate will increase from 22.5 cents to 25 cents in the dollar. So if you receive the Family Tax Credit, the amount of Family Tax Credit you receive will start to decrease sooner and by more as your earnings increase.
The Family Tax Credit itself will increase for the first child under 16 by $9 a week, and for the other children under 16 by between $18 and $27 a week each.
INDEPENDENT EARNER TAX CREDIT
The Family Incomes Package gets rid of the Independent Earner Tax Credit (IETC). Less than a third of eligible people actually claim it during the year and increasing the $14,000 tax threshold to $22,000 largely compensates those who were receiving the IETC.
For some middle income earners, the combination of the new tax thresholds and disappearance of the IETC results in an annual tax saving equivalent to the value of a flat white and big brekkie for two or a couple of mid-size grocery runs, depending on whose calculator you use.
HOUSING ASSISTANCE
After staying at the same levels for the last decade the Accommodation Supplement will increase. The Supplement assists beneficiaries, pensioners and lower income working families to meet rental, board or mortgage payments. For smaller households it will increase by $25 to $75 a week and for larger households by $40 to $80 a week. Increases will be geared to recognise where people live in areas where housing costs have increased most.
Students who receive the Accommodation Benefit will see this increase by up to $20 a week.
If you would like to discuss any of these changes, please give us a call.
