2006-07 Post-Budget Address
The Hon Peter Costello
Treasurer
Underlying cash balance
3
Per cent of GDP
Per cent of GDP
3
1
1
0
0
Outcomes
-1
-2
Projections
2
Estimates
2
-3
-1
-2
-3
1995-96
1999-00
2003-04
2007-08
General government sector net debt
and net interest payments
Per cent of GDP
15
Estimates
Per cent of GDP
Outcomes
20
2.0
1.5
10
1.0
5
0.5
0
0.0
-5
-0.5
1981-82
1985-86
1989-90
Net debt (LHS)
1993-94
1997-98
2001-02
Net interest payments (RHS)
2005-06
Ability to re-direct spending
40
$billion
$billion
Assistance
to families
with children
30
10
Public debt
interest
30
Hospitals
& schools
Assistance
to families
with children
20
40
20
Hospitals
& schools
10
Public debt
interest
0
0
1996-97
2006-07
Terms of trade
130 Index (2003-04 = 100)
Index (2003-04 = 100) 130
120
110
110
100
100
90
90
Forecasts
120
80
70
Jun-65
80
70
Jun-71
Jun-77
Jun-83
Jun-89
Jun-95
Jun-01
Jun-07
Personal income tax cuts
2005-06
Current tax thresholds
Income range ($)
0 - 6,000
6,001 - 21,600
21,601 - 63,000
63,001 - 95,000
95,001 +
From 1 July 2006
Tax rate
%
0
15
30
42
47
New tax thresholds
Income range ($)
0 - 6,000
6,001 - 25,000
25,001 - 75,000
75,001 - 150,000
150,001 +
Tax rate
%
0
15
30
40
45
•
Low Income Tax Offset increase to $600 plus phase out from $25,000
(up from $21,600).
•
Medicare levy phase-in halved.
Personal Income Tax Cuts
1 July 1996
Income range
($)
0 - 5,400
5,401 - 20,700
1 July 2006
Tax rate
%
0
20
20,701 - 38,000
34
38,001 - 50,000
43
50,001 +
47
Income range
($)
0 - 6,000
6,001 - 25,000
Tax rate
%
0
15
25,001 - 75,000
30
75,001 - 150,000
150,001 +
40
45
Work incentives with income tax reform
Tax cut per year (% of tax paid)
Tax cut per year ($)
100
7,000
90
6,000
80
5,000
70
60
4,000
50
40
3,000
30
2,000
20
1,000
10
0
10,000
0
30,000
50,000
70,000
90,000
110,000
130,000
150,000
Taxpayer's annual income ($)
Tax savings - $ per year (RHS)
Tax savings - percentage reduction (LHS)
A more competitive income tax system
12 Top threshold, multiple of the average wage (bars)
Top marginal rate, per cent (dots) 80
Average top marginal tax rate = 46.7
70
10
60
8
50
6
4
40
Average
threshold = 2.4
30
Australia (2004-05)
20
2
10
France
Canada
Poland
Switzerland
Korea
Japan
Portugal
Italy
US
0
Slovak Rep
Hungary
Ireland
Denmark
Luxembourg
Belgium
Mexico
UK
Australia
Germany
Netherlands
Iceland
NZ
Greece
Sweden
Finland
Czech Rep
Austria
Norway
Turkey
Spain
0
A more competitive income tax system
12 Top threshold, multiple of the average wage (bars)
Top marginal rate, per cent (dots) 80
Average top marginal tax rate = 46.7
10
70
60
8
50
6
4
40
Average
threshold = 2.4
Australia (2004-05)
Australia (2006-07)
30
20
2
10
0
Slovak Rep
Hungary
Ireland
Denmark
Luxembourg
Belgium
Mexico
UK
Australia
Germany
Netherlands
Iceland
NZ
Greece
Sweden
Finland
Czech Rep
Austria
Norway
Turkey
Spain
Australia
France
Canada
Poland
Switzerland
Korea
Japan
Portugal
Italy
US
0
Increased benefits for families from
1 July 2006
• Family Tax Benefit Part A threshold will increase from
$33,361 to $40,000
– In 2004 the first taper rate was reduced from 30% to 20%
• Large Family Supplement will extend to families with
3 children
• More child care places
– Outside School Hours Care and Family Day Care places will be
uncapped
• Maternity Payment will increase from $3,166 to $4,000
• Child Care Tax Rebate will be payable
Older Australians and carers
• One-off payment equal to Utilities Allowance ($102.80)
– To pensioner households
– To individual self-funded retirees
– To households with recipients of Mature Age Allowance,
Partner Allowance, Widow Allowance
• Ongoing eligibility to Utilities Allowance extended to
recipients of Mature Age Allowance, Partner Allowance
and Widow Allowance
– Six-monthly payments will commence in 2006-07
Business tax cuts
$million
$million
1,400
1,400
1,200
1,200
1,000
1,000
800
800
600
600
400
400
200
200
0
0
2006-07
2007-08
2008-09
2009-10
Superannuation proposals
• No benefits tax for retirees aged 60+
– Simpler tax arrangements for retirees aged 55-60
– Reasonable Benefit Limits abolished
• More generous pension assets test taper
– Taper rate halved to $1.50 per $1,000 above $157,000
(single homeowner)
• Self-employed: full deductibility and access to
co-contribution
• More flexibility for people who want to work longer
Simpler tax rules for retirees
Lump sums – Age 60+
Simpler tax rules for retirees
Superannuation pensions
Includes superannuation pensions commenced before 1 July 2007