The Six Thousand Dollar Threshold Myth

The welfare and tax systems have evolved separately, with little coherent thought about how they should interact. The tax system as it now operates penalizes hard working people and frustrates attempts by the under-employed from seeking financial self-reliance.

There must be greater transparency, better co-operation and proper accountability between the taxpayer, the paymaster, the ATO and Centrelink.

The marginal tax rate applicable to the majority of Australian workers is 30%. It is also a time honoured rebate rate as well as being the current corporate rate.

We advocate the abolition of the 15% rate of personal taxation, in exchange for an increase in tax-free threshold from $6,000 to $20,000.

This uniform threshold would apply to every resident taxpayer in Australia, regardless of income.

Our proposal would eliminate the need for the current $1,200 Low Income Tax Offset entirely.

Taxpayers eligible for the current dependant tax offset of $2,100 would be given a threshold increase of $7,000 – meaning they would pay $0 tax until the first $27,000 of income earned.

The average Family Benefit A payment is approximately $3,600 per annum, per child. This is equivalent to an increased threshold of $12,000 where there is a 30% rate of taxation.

In respect to the higher marginal rates of 40% and 45% there are considerable opportunities for non-salaried taxpayers to exchange the 45% and 40% rates for the 15% and 30% rates.

What we are proposing may seem radical and risky at first glance. However, we believe that the Australian Taxation Office could easily determine that amount of monies that shift due to tax reduction initiatives. The cost of foregoing the 40% and 45% rates entirely can therefore be identified, without the need for costly modeling.

For every dollar foregone by the Government from the low income taxpayers, it is reasonable to assume that much more will be gained by preventing arbitrage by high income earners.