Budget 2016/17: Reducing the tax burden

Tax relief is on the way for low and middle-income earners.

Budget 2016/17 – reducing the tax burden

Bracket creep is often cited as the single-most damaging financial aspect of the average income earner. Well, if you consider $80,000 to be an average income, relief is on its way.

Reducing personal income tax burden

From 1 July this year, the threshold at which individuals move into the second highest tax bracket of 37 per cent, will increase from $80,0000 to $87,0000.

This measure is expected to keep 500,000 Australians in the middle tax bracket for longer and has an associated cost of $4 billion over the forward estimates period until 2020.

Medicare levy threshold increase for low-income earners

Low-income earners will benefit from an increase in the Medicare level low-income thresholds from the 2015-16 financial year. In response to movement in the Consumer Price Index (CPI) the threshold will be increased so that those on lower incomes remain exempt from paying the Medicare levy.

Family situation






Single seniors and pensioners


Couple seniors and pensioners


This measure has expected associated costs of $280 million over the forward estimates period until 2020.

Do you think $80,000 is an average income? Should more be done for those on lower incomes?



    To make a comment, please register or login
    4th May 2016
    Just think what could be done with $4 billion.

    And how much will those upper income people notice the difference?

    Some flash values and principles this mob govern by!
    4th May 2016
    At 74 I am an average income earner where do they get their figures from? my salary is no where near $80,000 and never in my life have I earned the "average wage" a lot of crap, if everybody that received a salary earned that much there wouldn't be the need for so many mothers forced into the workforce. Think how much that would save on childcare!
    Tom Tank
    4th May 2016
    The $80,000 figure is the average income but that is including the incomes at the top end of town.
    The income of the average person is $57,000 but that means that 50% of the working population is earning less than that figure.
    Actually 80% of the population earn less than this magical $80,000.
    The obvious question then is who are the LNP looking after?
    You don't have to be a rocket scientist to work out the unfairness of this measure especially given the budget emergency that has been touted for so long yet the well off are getting a tax reduction costing the economy $billions.
    6th May 2016
    There are 3 measures of "Average", Mean, Median and Mode.
    Mean is the arithmetic calculation by adding all the incomes and dividing by the number of incomes. It is prone to distortion by very low and very high incomes.
    Median is the value that is at the middle of the data where there as many values above than below.
    Modal is the value that occurs most often.
    All of the above do not include the Black economy.
    Dave V
    4th May 2016
    If I've understood correctly, about $80,000 is the average income for full-time workers in Australia, and they're the ones who pay most of the tax in this country, so I wouldn't be complaining too much about them getting a little relief.
    4th May 2016
    $80,000 is NOT a high salary.

    A few examples:

    Most people in Australia would consider teachers as being underpaid. Well the salary of a 5 year trained classroom teacher (step 6) is $65,486 and the absolute highest salary on the scale step 13 is $92,892.

    Another group of people that most would consider underpaid are nurses. Well in NSW a registered nurse can earn between $59,394 and $83,309. And a probationary Police Officer in NSW starts at $65,059.

    So tell me again just how wealthy someone is on the average $80,000!
    4th May 2016
    this government has no idea if they think the average wage for workers is $80,000.00 per year i would love the be on the average wage but we all know this is not the case except the government that is so pull your head in Dave the average wage earner in Australia gets very little out of this budget
    4th May 2016
    Like Debbie, it is not whether or not you think that it is the average wage. It is not whether or not the Government thinks it is the average wage. The average wage is just that - the average wage, and individual's opinions so not matter.
    Chris B T
    4th May 2016
    Just how dumb this is,raising the $80k to $87k.
    It means the higher income earners reach the lower tax threshold eariler than in the past.
    Just how many $100k plus earners pay at this rate. Sure it may be deducted from earnings, but refunded when completing their tax return.
    Bracket creap only traps the lower paid worker.
    Re "stink" on this one.
    4th May 2016
    Chris, those that will benefit from this tax reduction amounts to half a million people. That's it! And the extra in their pay packet is around $350 per year or about $6 a week. And it DOESN"T apply to those earning $100,000 a year.
    Chris B T
    4th May 2016
    How does this not apply, as Anyone Can Reduce There Taxes by Deductions, Negative gearing.
    You can have very higher earnings way above $100k and pay very little or no tax.
    The goal is to reduce your tax payments as low as you can go.
    By rasing this threshold it made it whole lot easier for some.
    Tax is also paid on a Tier Rates.
    4th May 2016
    Chris but that is not a result of moving the tax threshold by $7000 for $80,000 to $87000. Anyone earning over $87000 does NOT get a tax cut this time round. It makes no difference to anyone earning more, the same rules apply as yesterday. Only super contributions have or will change.

    And those of significantly higher salaries have to continue to pay the 2% levy that was introduced for high earners to cover the nations debt instead of it ceasing in June this year.
    4th May 2016
    Surely KSS those earning $100k also have part of those earnings in the adjusted bracket, thus benefit from the change.
    Chris B T
    4th May 2016
    You pay tax on your taxable income not what you earn.
    Thats what it has been for all time.
    So by reducing your taxable income below these set levels is the actual tax payable. Tax collecting from set earnings is the same, by completing your tax return you will receive a refund of taxes taken from you. Unless you haven't filled one out.
    Reguardless of earnings you only play what is called taxable income,
    which is after all deductions, negative gearing etc has reduce your income to a lower level or could be below the $18k/ possible but not unacheiveable.
    By filling out your tax return, you should know this.
    2% levy is on taxable inccome as well.
    4th May 2016
    Chris: you have 2 issues:

    1. that higher income earners take advantage of an increasing threshold. That is unavoidable. It certainly does represent a tax decrease for high income earners.

    2. that there is inequity in the number and sorts of deductions which can be deducted from gross income to arrive at the all important taxable income. I agree that there are many rorts happening and that the rich milk it like there is no tomorrow. We all know the expensive family car is a tax deduction. Yeah right. We all know that some family trips, accommodation and meals are called business travel. We all know Joe Hockey cheated with his electoral allowance and rented out rooms to his pollie mates whilst claiming the living away from home allowance. It goes on and on. It is cheating on a massive scale and high income earners should be paying heaps more tax and being prosecuted.
    My wife used to work in an accountant's office and she tells the story about Roger *****, a successful lawyer who later became the Tax Commissioner). She describes Roger's annual appearance in the office with the request "Ian, I do not want to pay tax". Work the rest out.

    I have little sympathy for the rich. Not because they are rich but because they cheat expensively. It's a game.
    Chris B T
    5th May 2016
    Did you read my post's ?
    I have no issues, just stating what is happening.
    Higher the earnings, higher the disposable income.
    The Game Plan Is to Pay as Least Tax as possible.I might add there doing this legally. We have the best Tax System For Higher Earners.
    We pay Taxes on Taxable Income not what We Earn.
    This is more achieveable in a Two Income Family.
    4th May 2016
    I watch this treasure on parliament time, and he can't even add up, it was laughable.
    4th May 2016
    And I can't spell , sorry. Ahah.
    4th May 2016
    The best way to arrive at a fair tax system is to to do something like this. State HOW MANY PEOPLE are in the categories:-
    PERKS + INCOME $2m+; $500k- 2m; $150k - $500k; $80k - $150k; pension rate - $80k.
    The bulk of assistance is needed to help the lowest paid people in the last category and they will best be aided by setting the tax free threshold at $20 - $30k. Get the revenue from the the others.
    4th May 2016
    Most of the PAYE revenue already comes from the top earners.
    4th May 2016
    Do you mean those who earn $1 million of more? Quite a few of these.
    How about you start using REAL figures Sceptic rather than pulling the wool over people's eyes. The only figure which really counts is tax as a PERCENTAGE of gross income. That way you can compare across all income earners and get the real picture.
    6th May 2016
    When you restricted the STINMOD base population to the working age population only (aged 18 to 65) and rank these people by their taxable income, you find that the top 10% (those with taxable incomes beyond $102,000 per annum) do pay around 52% of all personal income taxation.
    Since high income earners usually have greater scope for minimising tax through deductions, such as negative gearing, we can use an alternative income measure called “total income from all sources” to rank personal incomes. On this ranking, the share of personal income taxation paid by the top 10% drops to 50.5%.

    Australia’s personal income taxation system is strongly progressive, with higher income earners paying both a higher marginal tax rate and average tax rate compared to lower income earners. According to STINMOD, the 90th percentile of working age taxable income is $102,000 per year, while the median taxable income is $39,000 per year. The average tax rate of the 90th percentile is 26.7% while that of the median tax payer is less than half that at 12.3%.

    This analysis does include a large number of people who are of a working age but not in the labour force - around 21% of this population (2.9 million persons). These people are not in the labour market for a range of reasons such as disabilities, students, young parents or through personal choice or a range of other reasons. Removing these people from the analysis reduces the tax share to 46% paid by the top 10%.
    4th May 2016
    The real story is for anybody with a registered business. Tax cut to 25%.
    4th May 2016
    Typo. 27.5%...going down to 25%.
    6th May 2016
    First of all they would need to make a profit. In my opinion I don't know how they can cost something like that? Are they assuming a certain level of salary sacrifice contributions to superannuation? Are they assuming a certain level of capital investment and business growth?

    Join YOURLifeChoices, it’s free

    • Receive our daily enewsletter
    • Enter competitions
    • Comment on articles