Money minds turn to tax cuts

THE Morrison Government’s surprise election victory sparked a sigh of relief last week from investors and self-funded retirees, and public attention now turns to tax cuts.

In just over a month, more than 10 million workers will be eligible to receive up to $1080 of tax cuts when they file their annual tax return.

It’s the first stage of the Morrison Government’s massive income tax reduction program, and there have been calls for it to bring forward future stages by several years.

Labor’s election policies to change capital gains tax, negative gearing and franking credit refunds are now a memory. However, it and minor parties can still block future tax announcements in the Senate.

In the meantime, the only tax news is good news.

H & R Block director of tax communications Mark Chapman said the only significant tax-related election proposal remaining was tax cuts.

“All those things Labor was proposing are off the table now,” he said.

“Everything stays as it was and, for the segment of people who were going to lose their franking credits, there’s a lot of

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relief. As we head toward the end of financial year people need to get ready to lodge their tax return, get receipts together, talk to their accountant and get ready for July 1, as they do every year.”

BetaShares chief economist David Bassanese said this year’s tax cuts alone were unlikely to be enough to spur a sluggish economy, and the next round of planned tax cuts in three years was “too long to wait”.

The Coalition’s long-term tax plan removes the 37 per cent tax bracket and all taxpayers earning between $45,000 and $200,000 will be on the 30 per cent tax rate. Stage two – in July 2022 – lifts the top threshold of the 32.5 per cent tax bracket from $90,000 to $120,000, while the final stage, in 2024, flattens tax brackets further – delivering higher income earners thousands of dollars each year.

Mr Bassanese said the bigger cuts should be brought forward. “The sooner the better, it seems to me,” he said. “If they are planning on sending legislation to parliament soon, why not amend it and bring in some other tax cuts now? It can be justified due to the weakening growth outlook.”

Budget surpluses and rising income from a higher-thanforecast iron ore price could help pay for the cuts, he said. People earning between $48,000 and $90,000 get the full $1080 tax cut. Tax relief then gradually reduces to zero for people earning above $126,000.