At 7:30pm tonight, Wayne Swan delivered his 1st budget with a forecast budget surplus of $21.7 Billion for 2008-09.

Some of the main tax changes of the treasurer’s budget include changes to income tax for individuals, the child care tax offset, the baby bonus, the family tax benefit part B, and the 1% Medicare levy surcharge. The treasurer has also introduced a new education tax refund.

We summarise these changes and benefits below.

Income Tax Rate Thresholds

Proposed changes to individual income tax rate thresholds as of 1 July 2008 are:

 

Current – 2007/2008		Proposed – 2008/2009		Proposed – 2009/2010		Proposed – 2010/2011
Tax rate (%)	Income level	Tax rate (%)	Income level	Tax rate (%)	Income level	Tax rate (%)	Income level
0	0 – 6,000	0	0 – 6,000	0	0 – 6,000	0	0 – 6,000
15	6,001 – 30,000	15	6,001 – 34,000	15	6,001 – 35,000	15	6,001 – 37,000
30	30,001 – 75,000	30	34,001- 80,000	30	35,001 – 80,000	30	37,001 – 80,000
40	75,001 – 150,000	40	80,001 – 180,000	38	80,001 – 180,000	37	80,001 – 180,000
45	150,001+ above	45	180,001+ above	45	180,001+ above	45	180,001+ above

 

Low Income Earner Tax Offset

On 1 July 2008, the low income earner tax offset will increase from $750 to $1,200 and will apply to all incomes below $30,000. The result of this is that individuals will only start paying income tax when they earn over $14,000 per year as opposed to $11,000 per year. From 1 July 2009 this amount will increase to $15,000 and from 1 July 2010 it will increase to $16,000.

Child Care Tax Offset

From 1 July 2008, taxpayers will receive a tax offset of 50% of out of pocket child care costs up to a maximum of $7,500 per child. This is an increase from the current offset of 30% of out of pocket child care costs up to a maximum of $4,354 per child. This offset will also be paid quarterly as opposed to claiming it annually in individual tax returns.

Baby Bonus

From 1 July 2008, the baby bonus will increase to $5,000, however, it will only be available for families whose main income earner does not earn more than $150,000 per year.

Family Tax Benefit

From 1 July 2008, the family tax benefit part B will no longer be available for all families. It will now be income tested and will only be available for families whose main income earner does not earn more than $150,000 per year.

Medicare Levy Surcharge

From 1 July 2008, the 1% Medicare levy surcharge will apply to individuals earning more than $100,000 and couples earning more than $150,000. This is a change from the current surcharge that applies to individuals earning more than $50,000 and couples earning more than $100,000.

Education Tax Refund

From 1 July 2008, eligible parents will be able to claim this new tax refund in their 2009 tax returns. These parents will receive up to $375 per child attending primary school and up to $750 per child attending secondary school.

Other Changes

Some other changes announced in the budget are:

• Fringe Benefits Tax will apply to work laptops used mainly for private purposes;
• The luxury car tax will increase from 25% to 33% for cars costing more than $57,000.