Australia’s Costello Delivers A$21.7 Billion In Tax Cuts

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

11 May 2005

In something akin to a pre-election budget, Treasurer Peter Costello of the recently re-elected National/Liberal coalition government announced more than A$21billion (US$16.3 billion) in personal tax cuts plus further tax breaks for Australian business.

Announcing his tenth (and many say his last) budget speech as Treasurer, Costello painted a healthy picture of the Australian economy, with the budget in surplus by A$8.9 billion and economic growth forecast to rise to 3% in 2005/6, up from 2% last year.

"The Budget I announce tonight is framed for the future — the future opportunities of our young people, the future care of our aged, the future health services that our citizens will need and demand, the security of the nation, and the future growth of the Australian economy which is necessary if we are going to realise these goals," Costello told parliament in his opening remarks.

Some of the key taxation measures will mean that:

• The 17 per cent tax rate will be reduced to 15 per cent from 1 July 2005.
• The tax threshold for the 42 per cent and 47 per cent rates will be raised on 1 July 2005 and again on 1 July 2006. This means that taxpayers will not reach the highest marginal tax rate until they earn around 3 times average weekly earnings.
• The Government will abolish the superannuation surcharge on contributions and termination payments made or received from 1 July 2005 to encourage private savings.

On the business front, Costello announced A$1.8 billion in tax cuts which will mean that:

• The 3 per cent tariff applying to business inputs where no substitutable goods are manufactured in Australia will be removed from Budget Night. This will cost $1.3 billion over five years.
• A broader range of expenses incurred by business will become tax deductible.

Additional support was also announced for families and carers, and according to Costello:

• Since the last Budget, the Government has increased the maximum rate of Family Tax Benefit Part B, costing $2 billion over five years.
• The level of income allowed before Family Tax Benefit Part A is withdrawn will be increased to $37,500 a year from 1 July 2006.
• A bonus payment for carers will be paid in June 2005. $1,000 for recipients of Carer Payment and $600 for recipients of Carer Allowance.

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