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Tax indexation 1980- 81



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TREASURER

EMBARGO FOR RELEASE 3.00 PM, 1 JUN 1980

NO. 56

STATEMENT BY THE TREASURER, THE HON JOHN HOWARD, MP

TAX INDEXATION 1980-81

The Governor-General in Council has approved regulations prescribing the personal tax indexation factor and the Pay-As-You-Earn tax instalment deductions for 1980-81.

The regulations will be Gazetted next week.

In accordance with the income Tax. (Rates) Act, the

indexation factor is based on the increase over the level of the previous year of the average Consumer Price Index

for the four quarters ended March 1980. This was 9.7 per cent. However, this increase needs to be discounted for the effects of Government policy measures. Discounting

the base 9.7 per cent increase for the effects of the changed health care financing arrangements that took effect on 1 September 1979 - 0.3 per cent; the Government's oil

pricing policy - 1.3 per cent; and increases in other indirect taxes - 0.6 per cent - gives an adjusted increase of 7.5 per cent.

As I announced in my Statement of 6 March 1980, the Government has decided to apply 50 per cent indexation of the personal taxation.scale from 1 July 1980. Consequently, the percentage increase for indexation purposes will be 3.8 per cent - that is, an indexation

factor of 1.038. .

2.

In announcing the new tax arrangements that are to apply

from 1 July, I used, for illustrative purposes, an '

increase of 3.6 per cent. As the actual indexation factor is higher than this, the examples which I quoted at that

time need to be correspondingly adjusted.

I have, therefore, had prepared a similar set of tables to those I used in March which show, for selected income

levels, the reductions in tax that will now occur after 1 July. . .

For example, a taxpayer on the standard rate of tax with

a dependent spouse will be $4.75 a week better off as a result of the changes.

Indexation of the scales means that the tax free threshold will rise from $3,893 to $4,041. Every taxpayer will benefit from this change.

The standard rate of 32 per cent will now apply to incomes up to $17,239 instead of $16,608. The 46 per cent rate will apply to incomes from $17,240 to $34,478. The upper

limit of this range was previously $33,216. The 60 per cent rate will also commence to apply at higher levels of income than previously.

Also from 1 July, the size of the rebate for a dependent spouse and some other associated rebates will be increased.

The spouse rebate will increase from $597 to $800. This is an increase of 34 per cent and far in excess of what would have resulted from full indexation.

There will be a corresponding increase in the sole, parent

rebate which will go from $417 to $559. The invalid

relative rebate will be increased from $270 to $362 and the rebate for a parent or parent-in-law will rise from $539 to $722.

3.

These changes reflect the Government's desire to assist

in alleviating the relative disadvantage of single income families - particularly those on low incomes - under

present taxation arrangements.

As I made clear in announcing the changes in March, the proposed increase of $203 per annum in the dependent spouse rebate means that the larger relative gains will accrue to low income families with a single breadwinner.

When allowance is made for the higher rebates, the effective tax threshold for a taxpayer with a dependent spouse will increase from $5,699 to $6,542 and for a sole parent from $5,154 to $5,788.

In addition, the zone rebate for people who live in isolated areas and have dependent children will be increased because, along with the increased spouse rebate, the notional rebates for dependent children that are taken into account in calculating this concession are to be increased from the previous levels of $270 and $203 to $362 and $272, respectively.

Increases to the spouse and associated rebates and the

indexation adjustment are now expected to involve a revenue cost of about $636 million in 1980-81 - $20 million more than the estimate given in my Statement of 6 March.

The increased rebates and the indexation adjustment will be reflected in reduced tax instalment deductions from salaries and wages paid from 1 July 1980. Supplies of the new PAYE schedules will be made available soon after the

regulations are made so as to allow time for their incorporation in payroll procedures before the 1 July commencement date.

1 Jun 1980

TABLE NO. 1

WEEKLY TAX INSTALMENT DEDUCTIONS

TAXPAYER WITHOUT DEPENDANTS

Weekly Weekly

Weekly Deductions Deductions Reduction

Earnings Before 1 July After 1 July

1980 1980

$ • $ $ . $

100 9.35 8.45 0.90

120 15.85 14.95 0.90

140 22.35 21.45 0.90

160 28.85 27.95 0.90

180 35.35 34.45 0.90

200 41.85 40.95 . 0.90

220 48.35 47.45 0.90

240 54.85 53.95 0.90

260 61.35 60.45 0.90

280 67.85 . 66.95 0.90

300 74.35 73.45 0.90

320 81.75 79.95 1.80

340 90.95 88.45 2.50

360 100.15 97.65 2.50

380 109.35 ; 106.85 2.50

400 118.55 116.05 2.50

420 127.75 125.25 2.50

440 136.95 134.45 2.50

460 146.15 143.65 2.50

480 155.35 152.85 2.50

500 164.55 162.05 2.50

TABLE NO. 2

WEEKLY TAX INSTALMENT DEDUCTIONS TAXPAYER WITH DEPENDENT SPOUSE

Weekly Weekly

Weekly Deductions Deductions Reduction

Earnings Before 1 July After 1 July

1980 1980

$ $ . $ . $

100 , e • · . . .

120 4.50 . · 4.50

140 11.00 6.25 4.75

160 17.50 12.75 4.75

180 24.00 . " 19.25 4.75

200 30.50 V λ ' ■ 25.75 4.75

220 37.00 32.25 4.75

240 43.50 38.75 4.75

260 50.00 45.25 - ' 4.75

280 56.50 51.75 4.75

300 63.00 58.25 4.75

320 70.40 64.75 5.65

340 79.60 73.25 6.35

360 88.80 82.45 6.35

380 . 98.00 91.65 6.35

400 107.20 ... 100.85

420 116.40 110.05

440 125.60 119.25

460 134.80 128.45

480 144.00 137.65

6.35 6.35 6.35 6.35

6.35

500 153.20 146.85 6.35

TABLE NO. 3

TAX PAYABLE AT PROPOSED 1980-81 RATES COMPARED WITH TAX. AT 1979-80 RATES ON SELECTED LEVELS OF TAXABLE INCOME

- Taxpayer Without Dependants

TAXABLE 1979-80 1980-81 REDUCTION

INCOME RATES RATES

$ $ $ . · ' *

4,000 35.38 . . 100.0

5,000 366.08 306.88 16.2

6,000 696.78 626.88 10.0

7,000 1,027.48 946.88 7.8

8,000 1,358.18 1,266.88 6.7

9,000 1,688.88 1,586.88 6.0

10,000 2,019.58 1,906.88 5.6

11,000 2,350.28 2,226.88 5.3

12,000 2,680.98 2,546.88 5.0

13,000 3,011.68 2,866.88 4.8

14,000 3,342.38 3,186.88 4.7

15,000 .3,673.08 3,506.88 4.5

16,000 4,003.78 3,826.88 4.4

17,000 4,389.36 4,146.88 5.5

18,000 4,860.06 4,573.42 5.9

19,000 5,330.76 5,033.42 5.6

20,000 5,801.46 5,493.42 5.3

21,000 6,272.16 5,953.42 5.1

22,000 6,742.86 6,413.42 4.9

23,000 7,213.56 6,873.42 4.7

24,000 7,684.26 7,333.42 4.6

25,000 8,154.96 7,793.42 4.4

26,000 8,625.66 8,253.42 4.3

27,000 9,096.36 8,713.42 4.2

28,000 9,567.06 9,173.42 4.1

29,000 10,037.76 9,633.42 4.0

30,000 10,508.46 10,093.42 3.9

31,000 10,979.16 10,553.42 3.9

32,000 11,449.86 11,013.42 3.8

33,000 11,920.56 11,473.42 3·8

34,000 12,501.02 11,933.42 4.5

35,000 13,111.72 12,466.50 4.9

36,000 13,722.42 13,066.50 4.8

37,000 14,333.12 13,666.50 4.7

38,000 14,943.82 14,266.50 4.5

39,000 15,554.52 14,866.50 4.4

40,000 16,165.22 15,466.50 4.3

50,000 22,272.22 21,466.50 3.6

TAX INDEXATION 1980-81 (Table omitted from Press Release 1.6.80) TABLE NO. 4,^·.... ■ -." ' ' * 9

' V '' ' ζ ■ · '

TAX PAYABLE AT PROPOSED l?8tol^RATES COMPARED WITH TAX AT 1979-80 RATES ON SELECTED LEVELS OF TAXABLE INCOME

Taxpayer With Dependent Spouse

TAXABLE 1979-80 1980-81 REDUCTION

INCOME RATES * RATES

$ . $ * %

4,000 5,000 • · • , • ·

6,000 99.78 • · · 100.0

7,000 43.0.48 146.88 65.9

8,000 761.18 466.88 38.7

9,000 1,091.88 786.88 27.9

10,000 1,422.58 1,106.88 22.2

11,000 . 1,753.28 1,426.88 18.6

12,000 2,083.98 1,746.88 16.2

13,000 2,414.68 2,066.88 14.4

14,000 2,745.38 2,386.88 13.1

15,000 3,076.08 . 2,706.88 12.0

16,000 3,406.78 3,026.88 11.2

17,000 3,792.36 3,346.88 11.7

18,000 4,263.06 3,773.42 11.5

19,000 4,733.76 4,233.42 10.6

20,000 5,204.46 4,693.42 9.8

21 ,000 5,675.16 5,153.42 9.2

22,000 6,145.86 5,613.42 8.7

23,000 6,616.56 6,073.42 8.2

24,000 7,087.26 6,533.42 7.8

25,000 7,557.96 6,993.42 7.5

26,000 8,028;66 7,453.42 . 7.2

27,000 8,499.36 7,913.42 6.9

28,000 8,970.06 8,373.42 6.7

29,000 9,440.76 8,833.42 , 6.4

30,000 9,911.46 9,293.42 6.2

31,000 10,382.16 9,753.42 6.1

32,000 10,852.86 10,213.42 5.9

33,000 11,323.56 10,673.42 5.7

34,000 11,904.02 11,133.42 6.5

35,000 36,000

12,514.72 11,666.50 - 6.8

13,125.42 12,266.50 6.5

37,000 13,736.12 12,866.50 6.3

38,000 14,346.82 13,466.50 6.1

39,000 14,957.52 14,066.50 6.0

40,000 15,568.22 14,666.50 5.8

50,000 21,675.22 20,666.50 4.7