Raising the Tax Free Threshold
- Eco-Tax shifting: Introduction of new eco taxes, principally those on Carbon, Methane & Water.
- Lower TFT for Very High Incomes: Having the Tax Free Threshold gradually decline for incomes over about $150,000.
- Benefit Simplification: Instead of providing low-middle income benefits such as the Family Tax Benefits and health cards we propose directing this funding to increasing the TFT. Non-earner benefits such as the pension would also be increased by the cost of funding the health card for these clients.
- 35% Personal Tax Rate: The Henry Review suggests this rate should apply between $25,000 and about $180,000. Over this level the tax rate would step up to 45%.
Benefit Simplification
We propose replacement of the following tax benefits with a higher Tax Free Threshold:
- LITO: Low Income Tax offset. This already effectively raises the TFT for eligible low income earners to around $11,000 (2009-10) and $16,000 (2010-11).
- MAWTO: Mature Age Workers Tax Offset.
- SATO: Senior Australians Tax Offset.
- FTB-A: Family Tax Benefit Part A.
- FTB-B: Family Tax Benefit Part B.
- Low-income health-card: Replaced by higher TFT.
This would greatly simplify the tax system reducing compliance costs for all Australians.
Administration costs would also be greatly reduced. We wouldn't need two departments (ATO & Centrelink) trying to determine a person's income.
Removing Poverty Traps
Existing low-income benefits create a 'poverty trap' in that they discourage the low-income earner earning more than the maximum allowed. If a low-income health-card holder earns over the prescribed amount they lose the card.
The higher TFT does not work in this way. Once a person earns over the TFT they start paying tax only on the portion that is over the TFT threshold - nothing is 'lost' and they don't need to re-apply later.
Henry Tax Review
3rd May 2010: The
The Henry review suggests a $25,000 Tax Free Threshold.