Treasurer Josh Frydenberg has confirmed that the government is looking into speeding up the scheduled income tax cuts with the aim to boost consumption, which has been dealt a mighty blow as a result of the global pandemic.
“There were three stages to those legislated income tax cuts, and the benefit was very clear. We’re creating one big tax bracket between $45,000 and $200,000, where people pay a marginal rate of no more than 30 cents in the dollar,” Mr Frydenberg said in an interview on ABC Radio.
“So, we are looking at that issue, and the timing of those tax cuts, because we do want to boost aggregate demand, boost consumption, put more money in people’s pockets, and that is one way to do it.”
Under the government’s legislated tax cuts, in 2022–23, it is due to increase the top threshold of the 19 per cent tax bracket from $41,000 to $45,000, while the top threshold for the 32.5 per cent tax bracket will be upped from $90,000 to $120,000.
A year later, in 2024–25, the plan is to reduce the 32.5 per cent tax rate to 30 per cent, more closely aligning the middle tax bracket with corporate tax rates. At this stage, 94 per cent of taxpayers are projected to face a marginal rate of 30 per cent or less.
The Treasurer also assured Australians that another phase of targeted income support will be announced at the end of the month, to help businesses avoid the September cliff.
“The government will announce a new phase of income support on 23 July,” Mr Frydenberg said.
23 July is the date the government is expected to release a comprehensive economic update, including the results of its JobKeeper review.
Addressing the possible effects of the Victorian coronavirus surge on the JobKeeper review, the Institute of Public Accountants’ general manager of technical policy, Tony Greco, told MyBusiness that it could have a direct impact on the recovery process, including business and consumer confidence.
“The stimulus measures still have months to go, so the government still has some wiggle room to wait and see if the situation in Victoria can be contained,” Mr Greco said.
“I guess they knew that secondary outbreaks were to be expected after restrictions were relaxed, so not a real surprise.”