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Workers gain from Budget tax cuts

THE paypacket of the average worker in Australia will be bolstered by $10 a week, but better benefits from broad income tax cuts have been directed at both ends of the workforce.
Tax cuts ranging from $7 for low income earners to up to $120 for the rich, will be delivered as early as July this year.
Treasurer Peter Costello is banking on workers putting their savings away for a rainy day, instead of a once-off spending splurge that could endanger the future rate of inflation.
Workers earning up to $10,000 a year will not pay any tax, while the tax brackets at the top end of the scale will be reduced.
The top marginal tax rate of 47 per cent will be cut back to 45 per cent and the earnings threshold raised from $95,000 to a substantial $150,000.
The shift to $125,000 planned last year for July will be skipped.
The move means the new top rate will be in line with the OECD after the recent Hendy-Warburton tax report found Australia was well above the rest of the world.
It will be applauded by business and tax advocates who blamed the previous rate for creating a damaging brain drain in which well-paid workers went overseas to avoid paying so much tax.
The next rate, 42 per cent, will be cut to 40 per cent and apply to income earned above $75,000.
The surprise changes mean that only 2 per cent of workers will pay the top rate, leaving the vast majority covered by the 30 per cent rate.
Those middle-income earners will be rewarded with a combination of increased family tax benefits plus a shift of the threshold from $63,000 to $75,000.
The tax cuts stand in contrast to the Reserve Bank's interest rate rise last week, which was designed to reign back spending.
An upbeat Mr Costello at his 11th Budget, a record for an Australian treasurer, said the average family with two children would benefit by $30 a week once family payments were taken into account.
One more child will add $10 a week to the family's bottom line.
The personal income tax cuts will cost $36.7 billion over the next four years and will come into place as early as July.
The changes were coupled with a massive reform of superannuation and changes to business tax.
Mr Costello said he did not believe the tax cuts, which were much higher than had been foreshadowed, would pressure interest rates.
"We are in a debt-free position, we now have our ninth Budget surplus, this is another (surplus)," Mr Costello said.
"We are saving rather than borrowing and that is going to put downward pressure on interest rates."
The Government's Budget bottom line came in at $14.8 billion - exactly $3.3 billion above the Government's forecast just four months ago.
The move yesterday is likely to prove popular as the first step in further tax reform.
Mr Costello said he believed the overall changes, particularly the savings to lower income earners, would provide incentive for people to return to the workforce.