Federal Budget: Tax cuts to create jobs

Federal Budget: Tax cuts to create jobs
Federal Budget: Tax cuts to create jobs

The Government is delivering a further $7.8 billion in personal income tax cuts to support more than 10 million low- and middle-income earners worth up to $1,080 for individuals or up to $2,160 for couples.

This is on top of the $25.1 billion of announced tax cuts flowing to households in 2021‑22 under our legislated Personal Income Tax (PIT) Plan.

With the additional year of the low and middle income tax offset (LMITO), our PIT Plan will provide tax cuts of up to $7,020 for individuals, and up to $14,040 for couples, in total over the period from 2018-19 to 2021‑22.

Treasury estimates that extending the LMITO will boost GDP by around $4.5 billion in 2022-23 and will create an additional 20,000 jobs by the end of 2022‑23.

When Stage 3 is implemented in 2024‑25, around 95 per cent of taxpayers will face a marginal tax rate of 30 per cent or less.

Lower taxes means that hard-working Australians will keep more of what they earn, allowing them to spend more, help grow the economy and create more jobs.

Tax cuts to businesses:

The Government will deliver more than $16 billion in tax cuts to small and medium businesses by 2023-24 with around $1.5 billion flowing in 2019‑20.

This includes reducing the tax rate for small and medium companies, from 30 per cent in 2014‑15 to 25 per cent from 1 July 2021.

The Government is supporting business investment by extending temporary full expensing and temporary loss carry-back for an additional year.

This extension will enable businesses experiencing COVID‑19 related supply disruptions, or considering investing in projects requiring longer planning times, to take advantage of the incentives.

The Government’s business tax incentives are working. In the December quarter, investment in machinery and equipment increased at the fastest quarterly rate in nearly seven years as firms took advantage of the Government’s tax incentives. Firms’ capital investment intentions for 2020‑21 have also strengthened.

This will boost activity and employment in the short run, and raise the productive capacity of the economy for the future.

Combined, the extension of these two measures is estimated to deliver an additional $20.7 billion in tax relief to businesses over the forward estimates period. An estimated $320 billion worth of investment is expected to be supported by these incentives.

The temporary full expensing and temporary loss carry-back measures are estimated to boost GDP by around $2.5 billion in 2020‑21, $7.5 billion in 2021‑22, and $8 billion in 2022‑23, and create around 60,000 jobs by the end of 2022‑23.

May 11, 2021