Further tax reductions and moving everyone to a 3-step tax scale

The changes

· middle effective rate reduced from 21c to 20c (was 28c prior to July 96)

· income at which top rate kicks in increased from $38,000 to $40,000 (was a little under $31,000 prior to July 96)

· tax scale is simplified. Low Income Rebate built into the tax scale and the same 3-step tax scale applied to everyone.

Impact of the changes

Income band $0-$9,500 with no investment income $9,500 -$40,000 $40,000+
Gain per week $0 up to $10.50 $10.50
No of people 660,000 1,800,000 520,000

· for people with less than $9,500 of income, including some investment income, the exact size of the tax cut depends on the amount of investment income (eg someone with $5,000 of wages and $2,000 of interest income would gain by nearly $2 a week. Someone who earns $9,500 exactly, made up entirely of investment income, would gain by $8 a week.)

· example: someone earning a salary of $30,000 will gain by $4 a week

· example: someone earning a salary of $35,000 will gain by $5 a week

Current system

· 2 statutory tax rates: 19.5c up to $38,000 and 33c thereafter

· the Low Income Rebate (LIR) creates a lower first tax step of 15c by giving a rebate of 4.5c on the dollar for the first $9,500 of wage/salary or benefit income

· the rebate is reduced for income between $9,500 and $38,000 at the rate of 1.5c in the dollar

· this creates a 3 step effective scale for most people:

Þ 15c up to $9,500 (19.5c - 4.5c)
Þ 21c from $9,500 up to $38,000 (19.5c + 1.5c)
Þ 33c thereafter

· someone with only investment income currently pays 19.5c from the first dollar of income. Someone with $5,000 of wages and $2,000 of interest currently pays 15c on the $5,000 of wages and 19.5c on the $2,000 of interest.

· the system is complex and many people don't know their marginal tax rate.

New system

· gets rid of this complexity by building the Low Income Rebate into the scale and applying the same 3-step scale to eveyone:

Þ 15c up to $9,500
Þ 20c up to $40,000
Þ 33c thereafter

Cost of the change

· The total cost of the move to 20c to $40,000 plus the simplification to a universal 3-step scale is approx $400m per year. Nearly all of this is the cost of lowering the effective middle rate to 20c and extending the threshold to $40,000. Moving everyone to the 3-step scale is about $10m of the total cost.

© Scoop Media

Gordon Campbell: On the Sony cyber attack

Given the layers of meta-irony involved, the saga of the Sony cyber attack seemed at the outset more like a snarky European art film than a popcorn entry at the multiplex.

Yet now with (a) President Barack Obama weighing in on the side of artistic freedom and calling for the US to make a ‘proportionate response’quickly followed by (b) North Korea’s entire Internet service going down, and with both these events being followed by (c) Sony deciding to backtrack and release The Interview film that had made it a target for the dastardly North Koreans in the first place, then ay caramba…the whole world will now be watching how this affair pans out. More>>