Authors: Associate Professor Ben Phillips, Professor Matthew Gray & Richard Webster

The Coalition Government has passed through the Australian Parliament several stages of personal income tax cuts starting from the 2018-19 financial year. This paper models the average household tax rate, fiscal and distributional consequences of these personal income tax policy changes over the period 2018-19 to 2029-30. We consider which household types gain the most in terms of reduced tax paid and whether or not the tax cuts are sufficient to overcome bracket creep.

For the purpose of this research note the Coalition personal income taxation policies include the changes outlined in the 2018-19 Federal Budget and subsequent changes in 2019-20 and 2020-21 Federal Budgets. The Government rationale for the tax cuts are designed to ‘be simpler, reward effort and maintain progressivity’ (Commonwealth of Australia, 2019). The tax cuts are also claimed to return to taxpayers some of the fiscal drag being generated by the non-indexation of tax thresholds.

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