AUSTRALIA: Tax-free threshold raised

AUSTRALIA: Tax-free threshold raised
Australian PM Julia Gillard speaking about the carbon tax in 2011. The tax rate changes were made to provide extra income to poorer workers to compensate households affected by the carbon tax.

SYDNEY - Australia has overhauled its tax rates to provide extra income to poorer workers as a payoff for households affected by its controversial carbon tax.

Under the new tax rates which started this financial year, workers need to start paying tax only when they earn A$18,200 (S$23,760) or more a year, up from a previous threshold of A$6,000.

When combined with additional tax benefits provided to low-wage earners, incomes of up to A$20,542 are now tax-free.

The changes were introduced to offset the likely additional power costs to households as a result of Australia's controversial new tax on carbon, which is expected to increase household power charges by about A$600 a year.

They were also designed to make the tax system simpler and may enable up to a million people to avoid having to complete a tax return.

Australia has a progressive tax system, with workers paying higher rates of tax as their wages exceed certain amounts, or brackets.

The new tax regime cuts the number of tax brackets from five to four.

Levies for higher earners were not changed, with rates of 37 per cent for income between A$80,001 and A$180,000 and 45 per cent for all income above A$180,000.

While the rates for the lower brackets were increased to 19 per cent and 32.5 per cent, workers will still pay less tax because of the higher tax-free threshold.

The new measures came into force last July and were welcomed by analysts who said they would simplify the tax system, assist low-income earners and reduce the burden on the public to submit tax returns.

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