Second Reading Speech
Mr Costello (Treasurer)I move:
That this bill be now read a second time.
The measures contained in this bill will cut personal income tax for 9 million Australians.
The tax reductions will amount to $2.4 billion in 2003-04 and total $10.7 billion over the next four years.
The income tax reductions will be achieved in two ways.
Firstly, from 1 July 2003 the low income tax offset will be increased from $150 to $235 for low-income taxpayers. The phase-out threshold for the low income tax offset will also be increased from 1 July 2003 to $21,600.
As a result of these changes, a more generous low income tax offset will be available to more taxpayers. The maximum amount of the low income tax offset of $235 will be available to taxpayers on incomes up to $21,600, with some tax offset able to be claimed by taxpayers with annual incomes of up to $27,475. Taxpayers will also be able to have an annual income of up to $7,382 without paying tax, up from the current $6,882.
Secondly, for all other taxpayers, from 1 July 2003 the income tax thresholds will be lifted. The upper income limit for the 17 per cent rate will be raised from $20,000 to $21,600, the upper income limit of the 30 per cent rate will be raised from $50,000 to $52,000, and the upper income limit of the 42 per cent rate will be raised from $60,000 to $62,500.
By providing tax cuts through changes to the thresholds and through a more generous low income tax offset, the largest proportional reductions in income tax are provided to low income earners. A taxpayer with an annual income of $10,000 will pay 16 per cent less tax. Some taxpayers with annual incomes between $20,000 and $27,475 will have their tax cut by $329 per year, or 10.7 per cent. This is a much higher percentage reduction in tax than that provided to higher income earners. For example, those with annual incomes of $85,000 will have a 2.0 per cent reduction in their tax.
Senior Australians will also benefit from this proposal. The increase in the low income tax offset will mean that recipients of the senior Australians tax offset will be able to earn up to an additional $500 annual income before they have an income tax liability. This means that these senior Australians will pay no tax on annual incomes up to $20,500 for singles compared with $20,000 currently and up to $33,612 for couples compared with $32,612 currently. The Medicare levy thresholds for senior Australians will also be increased to ensure that they do not pay the Medicare levy until they begin to incur an income tax liability.
These changes mean that Australian taxpayers can keep a higher proportion of the earnings they receive after tax, providing improved incentives to pursue work, advancement and higher skills.
The tax cuts in the 2003-04 budget provide a responsible balance between the government's key goals. The government is meeting the higher costs of defence and security and is financing other priority programs such as education and health. The budget remains in surplus allowing for debt levels to be further reduced. After providing for the government's legitimate spending proposals, this government is able to return the benefits of good economic management and growth as tax cuts for all Australian taxpayers.
Full details of the measures in this bill are contained in the explanatory memorandum.
I commend the bill and present the explanatory memorandum.
Debate (on motion by Mr Edwards) adjourned.