Personal Income Tax Cuts

The Commonwealth Parliamentary Budget Office has released information on the financial implications, with distributions by gender, of the outcomes of the personal income tax changes announced in the May 2018 Commonwealth Budget.

The following tables reveal that the schedule of income tax changes flow through for a period of 10 years reflecting the forward estimates.  The estimates do not consider the implication of the Government’s policy to constrain the tax to a GDP ratio at or below 23.9%.

The Parliamentary Budget Office has also assumed that the timing of tax collections would not differ by gender.  The Parliamentary Budget Office disclosed, as set out below, their data sources.

Data sources:

  • 16 per cent samples of de-identified personal income tax and superannuation returns for the 2014-15 financial year from the ATO
  • Treasury provided the model for the 2018-19 Budget measure Personal Income Tax Plan and Economic and policy parameters as of the 2018-19 Budget
  • Morrison, S 2018, House of Representatives Hansard – Wednesday, 23 May 2018, page 81, Commonwealth of Australia
  • Fraser, J 2018, Secretary to the Treasury, Opening statement – May 2018 Senate Estimates (including the tabled document Personal Income Tax Plan – further information), 29 May 2018

While there has been recent comment in some sectors that the tax imposition, under the Government’s plans, is more generous to males than females, subsequent commentary and evidence has revealed that the estimates incorporate both male and female earnings which vary, being influenced by both hours worked and the differential occupational weightings between male and female.

As indicated by the Government, gender has no impact on the tax rate applying to disclosed income.

The reason for the differential between male and female relates to the average level of income earned by males working longer hours.  The research by the Parliamentary Budget Office reveals the final stages of the personal income tax plan will give an aggregate benefit in excess of $40 billion to Australian tax payers over the 10 year planning period.  Approximately 75% of that benefit will flow to males and marginally more than 25% to females.

On the basis of our observations, the proposed taxing methodology is gender neutral.  Notwithstanding, due to the average earnings of males compared to females, the benefit flowing to males will be greater in dollar terms.  The analyses undertaken by the PBO have not taken into account total household earnings and have relied on the tax returns of individual tax payers.

At a political level, we are observing continuing discussion in relation to the equity of the proposal, albeit it is gender neutral in its structure.

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