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skyscraper connoisseur
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Economic data forecasts, 2006-07
Economy hits $1 trillion
Revenue of $231.7bn
$10.8b cash surplus
GDP growth 3.25 per cent
CPI growth 2.75 per cent
Tax
42% rate cut to 40%
47% rate cut to 45%
Tax thresholds increased
Low income tax offsets up
FBT cut to 46.5%
Tax free super benefits for over 60s

Key spending

$2.3b roads and rail
$905m medical research
$538m mental health services
$241m doctor, nurse training
$993m family entitlements
$497m large family supplement
$623m for military
$1.9b heavy airlift defence aircraft
$802m for intelligence agencies
$644m for airport security
$3.7b business tax deductions


Tax cuts worth $37 billion, including reductions in the top two rates of tax, are the centrepiece of Peter Costello's 11th budget.

In an unexpected move, the Treasurer also revealed a plan to streamline the superannuation system and deliver tax benefits, especially to high income earners.

The top tax rate of 47 per cent will fall to 45 per cent and the 42 per cent rate will drop to 40 per cent from July 1. This will give those earning $150,000 a year a windfall of $120 a week.

Those with a $1 million-income will be $450 a week better off.

But the sweeping tax overhaul did not leave out low- and middle-income earners.

The threshold at which the 30 per cent rate applies has been lifted from $21,601 to $25,001. This rate will now apply up to $75,000.

The low-income tax offset will be lifted from $235 to $600. This will apply to all incomes below $25,000 and phase out between $25,000 and $40,000.

When combined with family tax benefit changes, a dual-income family earning $60,000 a year will be $35 a week better from the budget. A single-income family earning $40,000 a year will get a $40 a week windfall.

The cuts to the top two rates of tax were accompanied by threshold changes. The new 40 per cent rate will apply from $75,000 to $150,000 and the new top 45 per cent rate above that.

Fringe benefits tax will also be reduced to 47.5 per cent, a cut in line with the reduction in the top marginal rate of tax.

Business will also benefit from changes to depreciation worth $3.7 billion.

The maximum rate of Family Tax Benefit Part A will be expanded to families on incomes up to $40,000 (up from $33,361). The Large Family Supplement of $248 a year, which previously applied to those with four children, will now go to those with three children.

The Government will also boost the supply of child-care places by 25,000 by removing the cap on the number of outside school hours care and family day-care places.

Despite the new spending, the budget surplus next financial year is forecast to be $10.8 billion. The budget forecasts solid economic growth in 2006-07 of 3.25 per cent, up from 2.5 per cent this financial year. The surplus for this financial year is expected to be $14.8 billion.

Other key budget measures:

- A one-off payment of $102.80, before June 30, for households eligible for the Utilities Allowance and self-funded retirees with a Concession Allowance.

- $2.3 billion in road and rail funding including upgrades of the Hume, Bruce and Pacific highways.

- $500 million to improve the Murray-Darling River basin.

- An increase in spending on defence, including $1.9 billion to acquire new C-17 aircraft.

- $1.5 billion in new spending on terrorism prevention including airport security upgrades.

- Underlying $10.8 billion cash surplus.

- Economic growth forecast of 3.25 per cent.

Tax

- Personal tax cuts of $36.7 billion over four years.

- Tax thresholds increased across the board.

- 42 per cent tax rate cut to 40 per cent; 47 per cent rate cut to 45 per cent.

- Low income tax offsets increased.

- Fringe benefits tax cut to 46.5 per cent.

http://www.smh.com.au/budget-2006/first-report/index.html
 

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skyscraper connoisseur
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Discussion Starter · #3 ·
Randwicked said:
Woohoo! I'm taking my tax cut and buying canned foods and ammo.
I heard that canned foods and general food and vegetables prices has increased this year.

Ammo is avaliable in the military barracks.
 

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Why bother with a 2% pay cut. I'd rather see the money go to something useful then giving me small pocket change back
 

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Discussion Starter · #5 ·
ryan79 said:
Why bother with a 2% pay cut. I'd rather see the money go to something useful then giving me small pocket change back
Two points:

1. Greater incentives to save for super-annuation. Aging workforce and helping next generation in subsidising for baby boomer's retirement.
2. Lifting of the tax bracket and reducing top marginal payment from 47% to 45%.

These are important since Australia has a chronic lack of saving. Top bracket taxpayers have much greater propensity to save compared to the lower bracket. It would help Australia's current account deficit.

That doesn't mean the lower and middle income tax bracket didn't get tax cuts. They did, but not as big as the top marginal.
 

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Proud "Pricktorian"
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Once again Victoria and NSW get stooged on the GST revenue, why is it we put so much in GST, but get less back? Does anyone actually know why?
 

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lol - every state subsides each other in some form or another
nsw with gst and western Australia with company tax!
its called federation!
states want to make gst distribution an election issue - when in fact they are the ones who signed the originally agreement - its a way of hiding their complete incompetence in managing state affairs.

And I don’t believe the federal budget has anything to do with GST revenues or any statements made about it - as it is a STATE tax managed by the Commonwealth! The original contract was agreed upon by both parties.
 

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And Queensland gets stiffed on roads, again, whilst it's build, build, build down South

Good to see Defence getting well funded
 

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when you add total revenue by state governments in Australia and divide it by the population in that state and get revenue per capita

NSW AND VICTORIAN governments receive the most amount of taxation revenue per person in the state. QLD gets the second lowest.
yet the NSW government claims that it needs more GST revenue - lol – absolute incompetent
 

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And I don’t believe the federal budget has anything to do with GST revenues or any statements made about it - as it is a STATE tax managed by the Commonwealth! The original contract was agreed upon by both parties.
Is GST a state tax? I always thought it was managed by canberra?
 

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Discussion Starter · #11 ·
Lightning~Bolt said:
Is GST a state tax? I always thought it was managed by canberra?
Canberra collects it and distribute it to the states.

NSW gov't should directly collect within its boundry and don't let Canberra touch it and distribute to other states.
 

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I like this budget, however I think the top end should have gotten a tax hike, not a cut, but for the most part it's good. It's impressive to think our countries gunna hit a trillion. We blow all other countries of our population size and westernisation out of the water, Australia a pretty prosperous nation. But diversification needs to be made an initiative.
 

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exactly - the wealthy have very strong wealth mobility - if you create an environment that is not supportive of capital formation and wealth creation - then wealth will travel overseas very fast
remember wealth creates jobs and investment! if we tax wealth and the wealthy we will end up like 'old europe' with an average rate of economic growth of around 1% p.a. for 10 years - there is simply no motivation in those countries for enterpreunial activity
 

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Solid budget. Looks like it might be time to think about comming back. Ill just wait until the loonie is on par with the greenback and collect a nice 30% premium... :)
 

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Cee_em_bee said:
I like this budget, however I think the top end should have gotten a tax hike, not a cut, but for the most part it's good. It's impressive to think our countries gunna hit a trillion. We blow all other countries of our population size and westernisation out of the water, Australia a pretty prosperous nation. But diversification needs to be made an initiative.
And that kind of growth will only continue if the top rates are brought down, otherwise people will **** off overseas to get away from your country's rip off tax rates.
 

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Wheres zach and what have you done with him? Some good points there zach, its good to see your not the kid we thought you were :)
 

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I tend to like the budget, with attracting more high income earners to live and work here..
however, I rather dissapointed that the superannuation mandatory contribution (SGC) has not been lifted.. still 9% - which is rather low in comparison to some OECD ... it is saving for the future....
 

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I've been looking through the OECD website and I cant seem to find any comparison of compulsory savings regimes. Can you please direct me or give me some comparisons?
I wasnt actually aware that many countries had similar systems - with as much flexibility as Australia
 

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I think you will be continually disappointed with short-term and medium-term future budgets as increasing the compulsory super contribution is not on the agenda
 
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