Tax reform Australia: is the process of making amends in the system of tax administrations or in providing social or economic benefits. Tax reform includes reducing the taxes, making the tax system more progressive and understandable.
Tax reform is a firm step towards a fair collection of funds for the benefit of the public.
If we talk about Australia specifically, all the evidence points towards the fact that the Australian tax system is holding it back.
The expenses of Australia’s tax system are higher than they need to be. There’s a reason for it. Australia’s tax system needs to be updated as it was designed in a different time. It is not very economical to deal with the rising expenses.
As wisely said, “Modern problems require modern solutions” Therefore this new age generation needs a new approach towards taxes.
Therefore, tax reform is a great opportunity to support new lifestyles economically and continue to prosper.
Let’s dive into the world of tax reform in Australia.
Tax Reform Australia
Tax Reform Australia for 2024
If we talk about changes in personal tax rates, there are no changes in its threshold for the year 2024. The resident and non-resident rates and their thresholds also remain the same.
Changes in the Rates and Threshold for 2024
There are no announced changes in the personal income tax cuts for 2024.
However, talking about the stage three tax changes, the 32.5% marginal rate will be reduced to 30% increasing the top bracket to $200,000 into one big bracket between $45,000 – $200,000. The 37% tax bracket will be fully terminated at this point.
So there will only be three income tax brackets from 1 July 2024 which are 19%, 30%, 45%. Australians earning between $45,000 – $200,000 will face a marginal rate of 30%. Resulting from these changes, 94% or Australians will face a marginal tax of 30% or even less.
Talking about small businesses, those with an annual turnover of less than $10 million are capable of deducting the whole expense of the assets costing less than $20,000 immediately.
Whereas, assets costing %20,000 or more can be placed into the depreciation pool of small businesses and depreciated at 15% in the first income year and 30% in each income year after it.
There’s also a new incentive made for small businesses to buy energy saving technology.
The bonus tax deduction scheme allows small businesses with an annual turnover of less than %50 million with an additional deduction of 20% on spending on technology that saves energy.
It helps small businesses buy things like efficient fridges, electrifying their cooling and heating systems, installing batteries etc.
This incentive will be available on an expenditure of $100,000 with an additional bonus of %20,000.
A new tax reform is in discussion about superannuation which requires the employers to pay superannuation on the day they release their employees pay and salaries from July 2026.
These changes will be discussed at the end of 2023 by the ATO and treasury with the stakeholders and industry. The final decision will be implemented for the budget of 2023-2024.
Also Read About Super Funds Complains.
New Incentives for Property Investors
Here are two incentives that will help in increasing the supply of houses:
- New build-to-rent properties whose construction starts after 9 May 2023 will face an increase in the depreciation rate from 2.5% to 4%.
- Eligible fund payment from MITs to foreign residents will face a reduction in the rates of withholding taxes on income coming from newly built residential build-to-rent properties from 30% to 15% after 1 July 2023.
What is the tax situation in Australia for 2024?
Here’s the personal income tax situation in Australia for 2024 as personal taxes are what pretty much decides the entire tax situation for a person in Australia:
- For people earning up to $18,200, the tax rate is nil.
- For people earning up to $45,000, the tax rate is 19%.
- For people earning up to $200,000, the tax rate is 30%.
- For people earning more than $200,000, the tax rate is 45%.
Why is Tax so High in Australia?
Australia’s tax is high as the country provides funding for many more public and social benefits such as education, healthcare, infrastructure and much more. The Australian government has a lot of motives for its public and it keeps investing in different programs and schemes for its people.
Moreover, the Australian tax system also deals with income inequality and promotes taking equal and fair contributions from everyone. Progressive tax system means that people with higher income pay relatively high taxes and people with low incomes pay relatively low taxes. This system deals fairly with income inequality and supports the needy ones.
Whereas the higher tax rates are a good revenue for the Australian government and it plays a vital role in maintaining Australia’s infrastructure and for the overall prosperity.
To conclude, the taxes are paid in order to facilitate the citizens. They are merely for their benefit. It’s just like they are investing in themselves but giving the money to the ATO to do the job for them.
The ATO further sums up the amounts and decides the budget and decides the budget for the upcoming years.
In this article, we have given you a brief detail of tax reforms in Australia for the year 2024. It will give you a better understanding of the whole tax reform system.