Australian Government May Lift Tax Free Threshold

by Mary Swire, Tax-News.com, Hong Kong

16 August 2001

According to recent reports the Howard government is considering raising the tax free threshold for Australian citizens in stages from the present level of $6,000.

A $20,000 threshold was awarded to pensioners and low income, self-funded retirees over the age of 65 in the most recent budget, and Mr Howard is reported to be considering extending this to include self-funded retirees from 55 years old onwards. Another option which is being canvassed at the moment is the extension of the $20,000 threshold to welfare recipients.

The National Tax and Accountants Association has released estimates of the benefits of these proposed extensions, calculating that an increase in the threshold of this size would afford every eligible taxpayer a $45 per week pay rise, and even a rise to $10,000 would still deliver around $13 extra a week.

Although a spokesman for the Prime Minister said only that the government was 'considering its options', Mr Howard has confirmed that the Coalition will offer tax cuts provided that there is sufficient budget surplus to work with to combat what is called 'bracket creep'. This occurs where taxpayers move into higher tax brackets as their wages increase, but the tax thresholds are not adjusted for inflation which means that even those with relatively low incomes end up paying the higher rate.

Both Mr Howard and the leader of the opposition leader Kim Beazley have promised to return to taxpayers the extra revenue earned by the current government if successful in the forthcoming general election.

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