Less Tax? Win!

Just yesterday, Prime Minister of Australia, Malcolm Turnbull's parliament secures a major political victory, clearing the Senate 37 votes to 33 to speed up personal income tax cuts.

Lets discover together what exactly is Turnbull's tax cut plan? What impact will it have on us and the Australian economy?

What exactly is the income tax cut plan?

This is a seven-year long project with three stages aimed at gradually minimising Australian taxpayers' tax rates.

I'll take you to see the current financial year's personal income tax thresholds and rates:

Source: ATO

The above rates do not include 2% Medicare Levy

Stage 1

Effective from July 1st 2018 Government will push its landmark idea of giving middle-low income earners tax credits. Whilst increasing the upper threshold for the 32.5% marginal tax rate from $87,000 to $90,000.

Stage 2

The second stage valid from July 1st 2022 markets its core plan to:

• Increase tax credits granted to low-income earners (annual income below $66,667) from $445 to $645

• Raise the upper threshold for the 19% marginal tax rate from $37,000 to $41,000

• Mark up the upper threshold for the 32.5% marginal tax rate from $90,000 to $120,000

Stage 3

Last stage is due to set forth from July 1st 2024 is targeted at high income earners by:

• Discarding the 37% marginal tax bracket

• increasing the threshold for the 32.5% marginal tax rate from $90,000 to $120,000

• Raising the threshold for the 45% marginal tax rate from $180,001 to $200,001

Helping the rich save tax OwO?

From an economics perspective, high-income earners have greater awareness of investment and bigger appetite for material wellbeing than the average earning Australian taxpayer. Equipped with higher productivity and creativity, these higher class earners forge new employment positions, promoting the wellbeing of the economy. In light of success for the tax cut, high income individuals' real income increases, boosting their disposable income, investment and consumption expenditures. In the end, stimulating positive economic growth.

Whose win?

The clearing of income tax cut plan is not a 'hip hip hooray' moment for Australian residents and taxpayers but rather, you and I should be considering ways of avoiding waves of adverse changes in the economic cycle and global market. Under such conditions, how to disperse risk and how to protect our wealth become the main discussion.