Home
Shopping Cart - 
Your Association at Work - June 2008
Tax reform still on the agenda
No doubt the biggest news this month was Labor's first Budget in 13 years. In addition to the immediate tax changes (summarised at the end of this edition of Voice), the Government has committed itself to "root and branch" tax reform, which means we may see more significant tax reform in future Budgets.
As for this Budget, the two main stand-outs appear to be the restriction of various benefits payable to high income earners, and the fact that the Government stuck to its election promises and delivered on the tax cuts.
However, the Budget also highlights the disparities that can still arise, or which have been exacerbated, depending upon the personal situation of a taxpayer or their family.
As a very simple example, consider the consequences after 1 July 2008 for two 'working families' in similar, though not identical, circumstances. Both families are are expecting their first child in June 2009 (yes, it's a long gestation period), and have salary and wage earners with no deductions. However, one family has a single income-earner with a gross salary of $160,000, and the other family has two income-earners, both with a gross salary of $80,000 each.
With all other things being equal, the first family will not be entitled to the baby bonus of $5,000, and will have a net disposable income of $107,600 (i.e., $160,000 less $52,400 tax and medicare levy).
However, the second family will initially have a net disposable income of $121,600 (i.e., 2 x ($80,000 less $19,200 tax and medicare levy)), plus will be entitled to the baby bonus of $5,000 if the family earns less than $75,000 in the six months after the birth of the baby (which would only require the mother not to work, or be paid, for 3 or 4 weeks after the birth of the child).
So, as can be seen, the tax system still provides for some anomalous results. While a truly fair system for all taxpayers might be a bit of a pipedream, hopefully we will see a much fairer tax system, whether looking at working families or not, come out of this latest review.
