The federal budget's failure to include any changes to personal income tax rates and thresholds will push more Australians into bracket creep, tax experts say.
Middle-income Australians will bear the brunt of those changes, but experts warn workforce participation rates could fall as result of people receiving lower take-home pay. They want the Turnbull government to commit to personal tax cuts.
More National News Videos
- Video duration
- 01:37
The budget, an animated guide
The budget, an animated guide
Economics editor Ross Gittins gives an animated outline of the budget's key points.
Up Next
What happened on flight QF72?
- Video duration
- 04:40
- Video duration
- 04:40
What happened on flight QF72?
What happened on flight QF72?
For the first time, the captain of the imperilled Qantas Flight 72 reveals his horrific experience of automation's dark side.
Up Next
'Davos' of women comes to Sydney
- Video duration
- 01:02
- Video duration
- 01:02
'Davos' of women comes to Sydney
'Davos' of women comes to Sydney
Sydney has won a global bid to host the 'Davos of women' after it was backed by leading business and political leaders. Video provided.
Up Next
Mercedes Corby arrives in Bali
- Video duration
- 00:39
- Video duration
- 00:39
Mercedes Corby arrives in Bali
Mercedes Corby arrives in Bali
RAW: Mercedes Corby arrives at Denpasar airport on Friday, in a trip to bring her sister Schapelle home.
Up Next
Jamie Oliver serves a healthy dose of propaganda
- Video duration
- 02:01
- Video duration
- 02:01
Jamie Oliver serves a healthy dose of ...
Jamie Oliver serves a healthy dose of propaganda
The celebrity chef is on a mission to fight "massive ignorance" and junk food, bringing his Learn Your Fruit and Veg program to Australian schools.
Up Next
Police murderer extended sentence bid fails
- Video duration
- 01:56
- Video duration
- 01:56
Police murderer extended sentence bid ...
Police murderer extended sentence bid fails
Appeals by the family of murdered police officer Bryson Anderson to extend the sentence of the man convicted of his killing was refused by the Director of Public Prosecutions. Vision courtesy Network 10
Up Next
Afghanistan: Australia's longest war
- Video duration
- 02:16
- Video duration
- 02:16
Afghanistan: Australia's longest war
Afghanistan: Australia's longest war
Australians have been deployed in Afghanistan since 2001, and that doesn't look like ending any time soon.
Up Next
Australia's foriegn policy dilemma
- Video duration
- 02:36
- Video duration
- 02:36
Australia's foriegn policy dilemma
Australia's foriegn policy dilemma
A debate is raging in policy circles: whether to maintain a close alliance with the United States, or pull away and become closer allies with China.
The budget, an animated guide
Economics editor Ross Gittins gives an animated outline of the budget's key points.
The impact of bracket creep – where wage inflation pushes people into higher tax brackets – will hit those on middle incomes to worst, said PwC managing partner, financial advisory, Tom Seymour.
He said 55 per cent of revenue raised came from personal or corporate taxes. "We're funding spending through bracket creep and the hoped growth in wages," he told Fairfax Media.
Related Content
"It's a slow boiling frog and it just becomes more and more inequitable over time. It impacts the disposable income of mums and dads and that's not good when we're trying to grow the economy."
"Bracket creep is also a disincentive to work when we are trying to encourage greater workforce participation."
PwC says an average wage earner in 2029-30 will pay just under $34,000 in income tax, up from about $19,000 in tax for an average wage earner in 2016-17. The average wage is about $80,000 and is expected to rise to $116,000 by 2029-30.
The average wage earner will move from the 32.5¢ bracket to the 37¢ bracket. This is equivalent to a 7 per cent tax increase due to bracket creep alone, Mr Seymour said.
In 2015 PwC found that over five years, bracket creep will cost taxpayers $45 billion through higher income taxes.
KPMG tax partner Grant Wardell-Johnson said the Medicare levy hike adds further to the disproportionate amount of revenue raised from personal taxes.
All Australians will pay higher taxes from July 1, 2019 when the government will increase the Medicare levy from 2.0 per cent to 2.5 per cent of taxable income to fund the National Disability Insurance Scheme. Other taxes linked to the top personal tax rate, such as the fringe benefits rate, will also increase.
"Bracket creep is regressive and unfair, and may now be a permanent, rather than cyclical, feature of our economy," Mr Wardell-Johnson said.
It's a slow boiling frog and it just becomes more and more inequitable over time
Tom Seymour, PwC
Under federal budget changes announced on Tuesday high income earners making over $180,000 a year will benefit from the end of the debt levy – also known as the temporary budget repair levy.
Those earning more than $180,000 will get a tax cut of 1.5 per cent, bringing their marginal tax rate back to 47.5 per cent.
As the 2 per cent debt levy was not applied to those outside of the top tax bracket, those earning less than $180,000 face a 0.5 per cent increase in their rate of income tax (other than those in the low-income exemption brackets).
0 comments
New User? Sign up