THE Government has delivered on its promise to provide income tax cuts this year and next, but it has also unveiled plans to recoup billions of dollars by cracking down on the wealthy using hobby farms and employee-share schemes to avoid tax, and slashing in half the rebate for LPG conversions.
Already-announced changes to tax thresholds and rates mean by the middle of 2010, a person earning $60,000 will be about $8.65 a week better off, while those earning above $180,000 will gain an extra $66.35 a week. The cuts, promised in the 2007 federal election, will lower the current 40 per cent tax rate to 37 per cent by the middle of 2010, while the threshold for the 30 per cent rate will be lifted to $37,001, compared to $34,001 currently.
The threshold for the low-income tax offset will also be lifted from $14,000 to $16,000.
With expected tax receipts down by an extraordinary $210 billion over the next four years because of the economic slump, the Government is pressing ahead with plans to save billions by introducing a range of tax crackdowns and other revenue saving measures.
Buried in the budget papers is a plan to slash in half the rebate paid to people who convert their vehicles to LPG.
The rebate for post-factory conversions to LPG fuel systems will be cut from $2000 to $1750 on July 1 this year. It will be lowered further to $1250 on July 1, 2011, and then to $1000 the next year.
The rebate for factory-fitted LPG systems will remain unchanged at $2000 for privately owned new cars.
Rules applying to so-called non-commercial business losses will also be tightened to prevent the wealthy deducting tax losses from activities such as hobby farms that are deemed unlikely to make a profit.
The measure, which will begin on July 1 next year, will save the budget $700 million over three years.
Under the changes, people with taxable incomes above $250,000 will be unable to offset taxes on salaries by claiming losses for "activities that are more likely to be in the nature of lifestyle choices or hobbies".
The budget has also include a crackdown on wealthy executives using employee-share schemes for tax avoidance, netting an extra $200 million. The changes mean employees who receive salary through discounted company share packages will no longer be able to defer paying tax on the discount. The move is designed to close a significant loophole where the Government is powerless to recoup the deferred tax from executives who move overseas without meeting obligations.
Australians working overseas will also be targeted, ending tax exemptions for Australians working overseas for 91 days. The measure, to begin on July 1 and net $675 million over four years, will not apply to charity workers, aid workers, some government employees and people deemed to be working on projects of national importance.
The tax changes will in total net the the bottom line an extra $4.6 billion over four years.
