Budget Ends Tax Creep

The federal budget tonight announced new income tax scales for 2005/06 and 2006/07 which effectively hold tax as a percentage of income close to current levels (assuming incomes increase at 5%pa as they have over the last 5 years). This is achieved less directly than indexing the tax thresholds - it is achieved by a combination of reducing the lowest marginal rate from 17% to 15% and increasing the top two thresholds to $63,000 and $95,000 in 2005/06 and $70,000 and $125,000 in 2006/07.

FinDem has loaded the new scales into Tax Calculators in Research Centre. You can either calculate one year's tax for any tax scale from 1969/70 to 2006/07 with 'Tax Calculator' or you can study bracket creep over any years within this period by selecting 'Bracket Creep'. We have added a new Miscellaneous Chart which compares tax as a percentage of income for people on 1, 2 and 3 times Average Weekly Earnings allowing for incomes to increase at 5%pa from 2004/05 to 2006/07. Let us know if you have any queries about these calculations. You can download all the 2005 budget papers at http://www.budget.gov.au/

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