Australian Bureau of Statistics figures released on Wednesday confirmed that Australia has now entered a recession, with GDP contracting by 7 per cent in the June quarter, following a fall of 0.3 of a percentage point in the March quarter.
In response, Treasurer Josh Frydenberg confirmed that the government would use the federal budget on 6 October to introduce a range of tax measures, including bringing forward already legislated income tax cuts.
The legislated tax cuts, scheduled to be introduced from 1 July 2022, will see the top threshold of the 19 per cent income tax bracket increased from $41,000 to $45,000, and the top threshold for the 32.5 per cent tax bracket raised from $90,000 to $120,000.
From 1 July 2024, the 32.5 per cent and 37 per cent will be abolished, with a 19 per cent tax rate for those earning between $18,201 and $45,000, 30 per cent for incomes between $45,000 and $200,000, and 45 per cent as the highest rate for incomes above $200,000.
“We are considering the timing of those tax cuts, and any announcements would be made in the budget,” Mr Frydenberg said on Wednesday.
“It is fair to say these are very substantial reforms to our tax system, because you are going to have one big tax bracket between $45,000 and $200,000 where taxpayers pay a marginal rate of no more than 30 cents in the dollar, so you will have 94 per cent of taxpayers paying a marginal rate of no more than 30 cents in the dollar, whereas today it is 63 per cent.”
Mr Frydenberg also hinted at introducing fresh business investment measures in the budget while highlighting regulatory and red tape reduction.
“You will see more of this in the budget, which is how do we make it easier for businesses to grow, to innovate and to hire?” Mr Frydenberg said.
“How do we make it easier for businesses to do business? That is where, without great cost to the budget, you can unlock the entrepreneurship and the innovation of our businesses, and that is about cutting red tape. That is about the industrial relations flexibility.
“Yes, our debt will be higher than ever before because every dollar we spend today is borrowed money. But we had no option than to spend as needed to get the public through this crisis, but we are very focused on the recovery plan.”
The not-to-be-missed Accountants Daily Strategy Day will travel through Melbourne and Sydney in August to equip accounting professionals with the latest industry updates and tips for modern practice management as well as the latest cutting-edge technology, processes, strategies and trends shaping the future of accounting. Visit the website for more information: www.accountantsdaily.com.au/strategy-day
Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.