Federal Budget 2018 Discussions

With the 2018 Federal Budget released last night, what are your thoughts?

Key point:

Middle and low-income earners

From the 2019 financial year until the 2022 financial year, middle and low-income tax earners will get a tax offset of up to $530 a year.
From July 1, 2018 the top threshold for the 37 per cent tax bracket will increase to $90,000.
In the 2020s the income tax threshold will be further raised to combat bracket creep for middle and high-income earners.
The government will also keep the Medicare levy at 2 per cent, instead of increasing it to 2.5 per cent from July 1, 2019 as previously planned.

To me, the tax rate restructure is the biggest topic for discussion. I believe it benefits people earning more than $90,000 than people earning less than that amount.

Articles:
http://www.afr.com/news/policy/budget/federal-budget-2018-wi...
http://www.afr.com/news/policy/budget/federal-budget-2018-th...

Comments

  • +1 vote

    Correct.
    Everyone benefits from increasing the Brackets, and higher income earners will get the full benefit rather than a partial benefit that you'll get if you earn less than 90k

  • +4 votes

    i think its insane to get rid of the middle bracket, if you want to solve bracket creep then just increase them all by 3% every year. these tax cuts mean big earners get richer, this is not how it should work. if your earning 200k a year your not struggling, would an extra $20 a week make a difference. lll get about an extra $15 a week now, but i dont need it, id rather pay for an increase in the dole or whatever it is called now.

    most bullsh*t thing is the continuous increased tax on tobacco, but yet they ban vaporizing, clearly obvious the biggest addict of tobacco in this country is the government themselves.

    • +3 votes

      I agree. The tax offset to give money back to low to middle income earners are only planned to 2022. After that, the high income earners are the ones who gets all the benefits from this when compared relatively.

      I can see why they would increase tax on tobacco as it affects a minority of the public. At the end of the day, they believe it's worth losing a few votes from smokers because they'll gain a lot more votes from the general public.

    • -4 votes

      mean big earners get richer, this is not how it should work

      So people earning less should be the ones getting richer? What drugs are you smoking? If you earn more money, by definition you should be the one getting richer. Earn more money, get more rich.

      “Socialism is the philosophy of failure, the creed of ignorance, and the gospel of envy.” - Winston Churchill

      • +5 votes

        i don't smoke drugs, real mean snort.

        the point is the more you earn the more tax you pay, when i say richer, i mean they profit more from the tax cuts when they less need it.

        i earn over the top tax bracket, and now get an extra 1500 a year, yet i don't need it, people on lower incomes need it, like those on newstart

        • -4 votes

          the point is the more you earn the more tax you pay

          That's how it works now. That's how it will work under the new tax plan. Nothing changes. The more you earn the more tax you pay still applies.

          i earn over the top tax bracket, and now get an extra 1500 a year, yet i don't need it, people on lower incomes need it, like those on newstart

          Maybe offer the ATO to voluntarily pay more tax. I'm sure they would oblige :)

        • +1 vote

          and now get an extra 1500 a year, yet i don't need it

          I'll gladly take it off your hands!

    • +2 votes

      That's what I don't understand about the people who are jumping onto the #keepmytendollars bandwagon:
      1. Many/Most of the ones who are getting publicity about it are going to get WAY more than $10, and
      2. No-one is stopping you from donating your own money to whatever cause you want. In fact, it would almost certainly be MUCH more efficient for you to keep your own $10 and use it to support whatever cause you want.
      In your case Unclesnake go ahead and give your $15 to support the poor. Your allocation of your own money will almost definitely be more effective at alleviating poverty than the government sending it through the bureaucratic morass that is Centrelink.

      • +1 vote

        I don't understand about the people who are jumping onto the #keepmytendollars bandwagon

        I don't understand either! There was a huge outcry before about the co-payment of $5-6 for GP visits before and a large number of people protested saying that they don't have the extra few dollars to pay.

        Now they're getting an extra $10 and they're complaining that it's peanuts and they don't want it.

        What amount is ever going to be enough for them? If I'm not paying anything (tax) and I'm getting something for almost nothing, I wouldn't be complaining!

        •  

          The issue over the Medicare copayment was that struggling families with chronic health issues wouldn’t be able to afford large numbers of the copayment … think multiple visits per day to a doctor for some treatments. The #keepmytendollars is people who are doing okay saying they’d rather better funded services. The two groups are entirely compatible.

        •  

          @BigBirdy:

          If they're struggling that much, why would they not want any extra funds they can get. In this case, it's only $10, but anything helps.

        • +1 vote

          @bobbified: people doing okay saying they’d rather better funded services are not struggling families with chronic health issues. They are different groups, but what they want coincide: affordable health care

    • +2 votes

      Reducing the tax on the rich isn't making them richer.

      Reducing how much you forcibly take isn't charity.

    • +8 votes

      AUSSIE TAX SYSTEM EXPLAINED USING BEER!!

      Suppose that every day, ten men go out for beer and the bill for all ten comes to $100…

      If they paid their bill the way we pay our taxes, it would go something like this:
      The first four men (the poorest) would pay nothing. The fifth would pay $1, The sixth would pay $3, The seventh would pay $7, The eighth would pay $12, The ninth would pay $18, The tenth man (the richest) would pay $59.

      So, that's what they decided to do!!

      The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. "Since you are all
      such good customers," he said, "I'm going to reduce the cost of your daily beer by $20". Drinks for the ten men would now cost just $80.

      Being good mates and Australians they still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. Now what about the other six men? They were after all the paying customers. How could they divide the $20 windfall so that everyone would get his fair share? They realised that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.

      So, the bar owner suggested that it would be fair to reduce each Man's bill by a higher percentage the poorer he was, to follow the Principle of the Australian Tax System they had been using, and he proceeded to work out the amounts he suggested that each should now pay.

      And so the fifth man, like the first four, now paid nothing (100% Saving). The sixth now paid $2 instead of $3 (33% saving), The seventh now paid $5 instead of $7 (28% saving), The eighth now paid $9 instead of $12 (25% saving), The ninth now paid $14 instead of $18 (22% saving), The tenth now paid $49 instead of $59
      (16% saving). The six are better off than before and the first four continued to drink for free.

      But, once outside the bar, the men began to compare their savings. "I only got a dollar out of the $20 saving," declared the sixth man. He pointed to the tenth man and said "but he got $10!"

      "Yeah, that's right," exclaimed the fifth man. "I only saved a dollar too. It's unfair that he got ten times more benefit than me!"
      "That's true!" shouted the seventh man. "Why should he get $10 back, when I got only $2? The wealthy get all the breaks!"
      "Wait a minute," yelled the first four men in unison, "we didn't get anything at all.
      This new tax system exploits the poor!" The nine men surrounded the tenth and beat him up.

      The next night the tenth man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

      So! Boys and Girls, journalists and government ministers, is how the Australian Taxation System. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction.

      Tax them too much, attack them for being wealthy, and they just may not show up any more. In fact, they might start drinking overseas, where the tax atmosphere is somewhat friendlier.!

      •  

        I like the analogy - but the important difference is that all ten men make their money from the pub and pub-related activities.
        It is not always as simple as just leaving to find another pub and still taking money from it.

  • +2 votes

    I think our tax system is pretty progressive as it is - already most tax is paid for by a small percent of people. I'm already sometimes shocked at how much tax is coming out of my pay and I'm not a high income earner, but I accept it.

    The other thing to note is on top of taxation making things progressive, various benefits drop off as your income rises too.

    Personally I'm right around where the threshold of discussion is ($85-95k), and - if you include my HECS repayments - I know its not reallllly a tax but it is affecting my take home pay - I'm going to take home only 43c per dollar of income increases - not much of an incentive to earn more.

    •  

      Something a lot of people don't realise is that HECS repayments are paid with post-tax dollars. So the 7% compulsory repayment for 90K earners is closer to 10% pre-tax dollars.
      After HECS is all paid off, the extra take home income is quite significant.

      •  

        Actually I didn't realise that - just knew the dollar amount getting taken out each month and hadn't done the maths on whether it was pre or post tax.

        Can't wait to have mine paid off.

        •  

          Make sure you do your tax early, unlike me. My HECS was being taken out until Mar 2018. I hadn't realised if I had done my 2016-17 tax return earlier, it would've all been paid off and they could've stopped taking HECS out in Jul-Aug 2017. Bonus is that I'll get a refund for 2017-18 though.

  • +8 votes

    The bracket creep is so far in the future it might actually end up being delivered after the coalition lose an election and win back the next!

    I think it would have been better to skip all the tax cuts for now and stop borrowing and actually repay some federal debt. But that isn't what the Libs are about anymore, apparently. Which is a problem, because for generations we could count on the change of parties to balance needed spending increases against needed saving prudence, but if both sides are profligate, we'll end up like America or Japan with absurd levels of debt.

    • -5 votes

      Agreed, I think the changes will be repealed by the socialist Left if they get back in.

    • +2 votes

      Valid point - I too would rather see debt getting paid down - one of the benefits of govt is to go into deficit when the economy is down (helping prop it up) and taking it out via surpluses when economy is doing well to help stop it overheating. We're losing this latter point when its just being handed back as tax cuts.

      I can't even fathom us paying all the (net) debt down in the forseeable future - let alone before the next global downturn. Can't imagine when countries like you mentioned will do it, if ever.

  • +3 votes

    Looks good! I think it's fairer on those that work hard to get where they are.

    I expect there will be a lot of whinging about how "high income" earners benefit more from the changes than the "strugglers".

  •  

    Not my work, but a nice snapshot I got from Adrian Raftery (Professor at Deakin Uni). I pretty much agree with his comments.

    Likes

    • Increasing the number of SMSF members to 6. Eradicates the issues with some families but I couldn't see why they couldn't have made it ten!

    • 3 yearly cycle for audits of SMSFs - this will reduce the cost of compliance although I am sure a tax return and accounts will still need to be prepared.
      $10,000 cash limit on payments made to business - but we all know that it will still go on!

    • Pension Work Bonus being increased from $250 to $300 but why are we waiting til 1 July 2019? The increase is merely to cover inflation over the years.

    • Removal of the 37% tax bracket - ok its a few years away & will probably be changed a few more times between now & then but it certainly simplifies tax collection from individuals. Now lets look at marginal tax rates for companies & super funds in the future.

    • High income earners (over $263k) with multiple employers not having to have the SGC apply to all employers & thus breach the concessional super limit

    • GST on hotel bookings via foreign operators - although the cost will be borne by the ultimate user, we really need to stop all these "offshore" companies that are nothing more than online

    • The overdue infrastructure projects

    Dislikes

    • The promotion of the Pension Loans Scheme - the government can call it whatever they like but this is nothing more than a reverse mortgage which charges interest at 5.25%. With no compulsory repayment necessary, the impact of compounding interest will see the equity in pensioners' houses decrease over time. A ticking time bomb a generation away from now as estates slowly get reduced. And drawdowns on a loan should never be called income!!

    • Modest individual tax cuts - $135 on income tax plus $530 on a new low/middle income tax offset - being the centrepiece of the budget. Where did we lose our way with big impacting budgets?

    • The amount of revenue neutral items that were mentioned in the budget papers.

    • Although this was a budget for 2018/19, there are very few items mentioned which actually occur in 2018/19 - a large number of them don't take effect til 1 July 2019 & beyond.

    • The opportunity for young Australians to opt out of insurance in super. We are a nation that is underinsured and should be promoting rather than deterring coverage. This policy will only drive up insurance premiums for the rest of the population. There goes that tax cut!
      Dislikes (cont'd)

    • The focus on the black economy & phoenix operations should be a given & not highlighted every year. ATO & ASIC are the regulators & they need to enforce the laws to benefit the nation!

    • Transfer pricing - its a nice buzzword but really nothing of significance is going to stop the multinationals & their teams of tax consultants from minimising their worldwide tax.

    • Despite coming down quick on multinationals we are giving a tax exemption to the ICC for the upcoming T20 Cricket World Cup - more funds to UAE & India!

    • Combat Bracket creep? Not quite!! If we were to take an inflation rate of 2.5% over the next 7 years, then the highest marginal tax rate should be $213,963 rather than the proposed $200k - but that excludes factoring in any inflation since 1 July 2007 when the top marginal threshold was changed to $180k in the first place!! So should the new level be $273,891 in 2024/25???

    • If under $66,667 is considered to be a low income earner; up to $125,333 a middle income earner & either $180k or $250k as a high income earner, what category do you call those earning between $125k - $180k/$250k?

    •  

      GST on hotel bookings via foreign operators

      How will this be implemented? How can they track someone booking hotels via cheaphotels.com?

    •  

      ^THIS

      Although this was a budget for 2018/19, there are very few items mentioned which actually occur in 2018/19 - a large number of them don't take effect til 1 July 2019 & beyond.

      All the talk about getting the budget back into Surplus is based on extrapolating an uptick in the economy. This budget increases expenditure on the assumption that receipts will continue to increase into the future.

  • +1 vote

    I think the current tax system is not fair, there should be more tax brackets like what they have in S'pore. Tax rate increase small % when you move to the next band, this will help more on low and middle income earners.

    https://www.iras.gov.sg/irashome/Quick-Links/Tax-Rates/Indiv...

  •  

    Yay for the government cracking down on illegally imported cigarettes and forecasting $1 billion a year extra in the coffers. What on Earth were Border Force doing before.

  •  

    Government reverse mortgages should have been introduced a long time ago. It will stop oldies sitting on large property assets crying poor.

    • +2 votes

      hahahahahahahahaha…no more crying poor, hahahaha.
      I heartily agree, but rich oldies want to leave the eastern suburbs pile to the kids in the will, not fritter it away when they could get a pension.
      If they asset test the family home, even if it is something absurd like $3m+, it might start to get some traction with addressing asset rich people claiming welfare.

  •  

    Why on Earth would people on 100k get the Low Income Tax Offset? That is stupid.

    In fact, why have LITO at all?

    People on low incomes pay very little tax anyway, and in fact are nett takers from the system when you include Centrelink benefits.

    The TFT is $18.2k, if you include LITO, low income earners' TFT becomes more than $20.5k.

  • +2 votes

    The Budget has extended the small business instant asset write-off scheme, for items less than $20,000, for another 12 months.

  • +1 vote

    i don't care all this fairness on income tax crap

    just go abolish negative gearing & implement housing policy like germans

  •  

    It's hard to believe much of the headline figures around when surplus is meant to be achieved because of the assumptions that have been made.

    Look at the graphs on pages 21 and 22 from CBA analysis and make your own judgements on how likely the assumed Wage growth and Commodity prices are:
    https://www.commbank.com.au/content/dam/commbank/assets/pers...

  • +1 vote

    some interesting ideas above but ultimately it is structured to benefit people that earn more,

    if the gov moved the tax free threshold up by what ever amount, every person that earns above the threshold would benefit the same amount.
    That would be fairer, but that is not what this is about.

  • +3 votes

    This is a purely political budget, similar to the last Turnbull budget. Put a near term popular measure in that Labor and the crossbench feel compelled to pass (2017 budget: modest small business tax cuts, 2018: modest low and mid income tax cuts), but load it up with highly unpopular measures in the later years that Labor is compelled to reject (2017: generous big business tax cuts, 2018: generous high income tax cuts). Then demand it is passed as one bill, all or nothing. The process is designed with one purpose; wedge Labor. I’m dead sick of this Abott’esque crap and can’t wait to be rid of this bunch of self-serving tarts.

  • +2 votes

    They'll probably take the money out of health and education to pay for these cuts. Goodbye Medibank, TAFE and look forward to $200K uni degrees. We're headed down the same road as the U.S.A. If you need an operation in the U.S. and don't have the insurance or the money to pay - or both, you'll be given some pills to go home and die. Don't have the money to pay for private TAFE or uni? Join the unemployed.

    Remember folks, the most important things in life are health and education. Have both and the world is your oyster. Miss out on just one and you're buggered.

    OK, who'll be the first to call me a Commie…

    •  

      But the question is who should be paying for these? High income earners or make low and middle earners pay for it? This budget is leaned towards the latter.

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