House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello MP)

General outline and financial impact

Reducing personal income tax

Schedule 1 to this Bill amends the Income Tax Rates Act 1986 to increase the threshold where the 30 per cent marginal tax rate begins to apply (from 1 July 2007) and increases the thresholds for the top two marginal tax rates (from 1 July 2008).

This Bill also amends the Income Tax Assessment Act 1936 to increase the maximum amount of low income tax offset and to raise the threshold at which the offset begins to phase out.

In addition, this Bill amends the Medicare Levy Act 1986 to increase the income threshold that applies to taxpayers who are eligible for a rebate of tax under section 160AAAA of the Income Tax Assessment Act 1936 (the senior Australians tax offset).

Date of effect : The amendment to the 30 per cent marginal tax rate threshold applies for the 2007-08 income year, with the changes to the 40 per cent and 45 per cent marginal tax rate thresholds applying from the 2008-09 income year.

Proposal announced : This measure was announced on 8 May 2007 in the 2007-08 Budget and in the Treasurer's Press Release No. 034 of 8 May 2007.

Financial impact : This measure will have these revenue implications:

Compliance cost impact : Nil.