Tax cuts on the way soon

Clarke McEwan Accountants

Tax cuts on the way soon, but it's only the tip of the iceberg

Feared tax reform failed to eventuate when Labor lost this month's election, and money minds now turn to tax cuts. Some will arrive in July but much bigger cuts are also in the pipeline.

The Morrison Government's surprise election victory sparked a sigh of relief last week from investors and retirees across Australia, and public attention now turns to tax cuts.

In just over a month, more than 10 million workers will be eligible to receive up to $1080 of tax rebates when they file their annual tax return.

It's the first stage of the Morrison Government's massive income tax reduction program, and there have been calls for it to bring forward future stages by several years.

Labor's election policies to change capital gains tax, negative gearing and franking credit refunds are now a memory. However, it and minor parties can still block future tax announcements in the Senate.

In the meantime, the only tax news is good news.

H&R Block director of tax communications Mark Chapman said the only significant tax-related election proposal remaining was the tax cuts.

"All those things Labor was proposing are off the table now," he said. "Everything stays as it was, and for the segment of people who were going to lose their franking credits there's a lot of relief.

"There aren't going to be any unpleasant changes coming to the tax system any time soon.

"As we head toward the end of financial year the election takes a back seat and people need to get ready to lodge their tax return, get receipts together, talk to their accountant and get ready for July 1 as they do every year."

BetaShares chief economist David Bassanese said this year's tax cuts alone were unlikely to be enough to spur a sluggish economy, and the next round of planned tax cuts in three years was "too long to wait".

The Coalition's long-term tax plan removes the 37 per cent tax bracket completely and all taxpayers earning between $45,000 and $200,000 will be on the 30 per cent tax rate. Stage two - in July 2022 - lifts the top threshold of the 32.5 per cent tax bracket from $90,000 to $120,000, while the final stage in 2024 flattens tax brackets further - delivering higher income earners thousands of extra dollars each year.

"It would be helpful if the newly elected Morrison Government seriously considered a bring forward of additional tax cuts that have been promised to take effect over the next few years," Mr Bassanese said.

"The sooner the better, it seems to me. If they are planning on sending legislation to parliament soon, why not amend it and bring in some other tax cuts now? It can be justified due to the weakening growth outlook."

Budget surpluses and rising income from a higher-than-forecast iron ore price could help pay for the cuts, he said.

WHAT YOU'LL GET FROM JULY

• If you earn below $37,000 you'll receive up to $255.

• If you earn between $37,001 and $47,999 you receive between $255 and $1080.

• People earning between $48,000 and $90,000 get the full $1080 tax cut

• Tax relief then gradually reduces to zero for people earning above $126,000.

(Tax cuts will be paid through people's annual tax refunds)

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