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Budget 2006: Budget tax cuts wipe out interest rise.



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Peter Andren MP - Independent Member for Calare

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9 May 2006

Budget tax cuts wipe out interest rise

The government’s over-generous tax cuts have wiped out the impact of mortgage payment increases for most Australians, especially the most well-off, according to Peter Andren, Member for Calare.

“The Treasurer will return some $6.3B to taxpayers in the 2006-07 financial year, with increases in the income tax thresholds across the board, but again higher income earners will receive the lions share of the benefit,” Mr Andren said

“From 1 July 2006, low income earners won’t pay tax until their annual income exceeds $10,000 because of an increase in the low income tax offset to $600. But this measure stops short of raising the tax free threshold for all taxpayers.

“The income threshold for the 15% rate will be increased from $21,600 to $25,000 which saves households in this group up to $42 a month.

“The threshold at the 30% tax rate is also increased from $63,000 to $75,000, saving those at the top of this scale around $120 a month.

“These changes should help middle and lower income families meet their increased mortgage repayments as a result of last week’s interest rates rise.

“However the biggest savings will yet again be for the highest income earners, with increases in the income thresholds and reduction in the tax rates for the top two tax brackets.

“The 42% rate of tax will be reduced to 40%, and people can now earn up to $150,000, an increase of $55,000, before the top rate kicks in.

“Where those who have income between $95,000 and $150,000 now pay 47% tax on this amount, after July 1st they will pay 40%, saving up to $320 a month for the household budget - and federal MPs will be among the beneficiaries of this tax break!

“The top rate will also be reduced to 45% from 47%, and will only affect income over $150,001.

“These extremely generous concessions at the top end are likely to add to inflationary pressures, with the real possibility of a further interest rate increase later in the year, which will particularly hurt low- and middle-income earners.

“One wonders whether former PM Keating’s suggestion last night to deposit tax breaks in superannuation savings would not be a more sensible, long term policy,” Mr Andren said.

“The Treasurer has streamlined superannuation taxes with the removal of tax on lump sum payments and superannuation pensions for the over 60s, and eligibility for full deductions on super contributions and government co-contributions for the self-employed.

“Small businesses will also benefit from the 2% reduction in the fringe benefits tax rate, an increase in the depreciation rate to 200% and a clarification of eligibility for capital gains and other concessions under the Simplified Tax System.

“Overall, the tax breaks continue the government’s philosophy of putting money in people’s pockets now, rather than seriously boosting investment in services, infrastructure and savings.

“At a time when unprecedented revenue is coming from climate changing resource extraction it’s a travesty there is absolutely no new funding to encourage renewable energy initiatives,” he added.

For more information: Peter Andren - 02 6277-2341/0419-612-891 or Tim Mahony - 0427-480-825

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