2016 Federal Budget Part 1 – Bracket Creep

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3 Responses

  1. Interesting historical analysis. I thought it was a curious decision, they could have increased the other brackets by a smaller amount – or at least the one below the $80k (so the total impact was the same) and had a better political reaction.

  2. The super is a big change. Rather not cool that it’s been retrospectively been done, though $540K is still a huge amount of money. It will raise a lot more tax over time.

    I think the change was an extremely political one.. changing the $80k bracket only helps the 2 highest brackets ($80k-$180k and $180k). I think they said this would affect 30% of the working population, which I imagine is around their voting % lol.

    If the change had actually been to the $37K it would have helped everyone who was in full time work ( andevery bracket higher) and if they’d changed the $18,200 then it would have helped every single bracket. The amount it would have ‘cost’ the budget means it was ‘cheaper’ to just do that change for high earners, to ‘spend’ the same amount, the increase would have been much less to either $18,200 or $37k. However, as a % of their earnings, it would have helped the lower earners the most.

    Australia needs ALL of its working population to prosper (& grow their wealth+spending), it is the whole population that drives consumption. It is the $80k and less bracket that make up the vast majority of spenders at Wesfarmers, Woolworths, Telstra etc etc. Even if it’s the ‘rich’ that own the shares and get the benefits of that, it’s the general population that drives the big business performance. For increasing profits, inflation and wealth of companies and Australia, the whole population needs to thrive – otherwise we will be slowly heading back to 1800s where the purchasing power of less-average Joe will be a lot lower (pretty sure there were a few revolutions in that time because of issues like that).

    Considering how much Turnbull is touting innovation it is surprising that he does not see the odd system where we have created in Australia where investors think it’s a better thing to make losses on property (whilst speculating the price will go up) rather than putting all those billions into possible companies/ideas that could make better products/services in Australia and/or go overseas and really bring wealth back to Australia.

    Tristan

  3. Jef says:

    Thanks for sharing here Tom! My very simplistic analysis on tax is that if I’m paying more, it’s likely that I’m earning more 😉
    Having said this I’m all for tax minimisation & even moving to a place where tax is lower depending on your life situation and goals.

    Looking forward to hearing your thoughts on Super in post 2, my thoughts are that it’s somewhat disappointing that they keep moving the goal posts on this although it’s mostly out of our control

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