Thursday, May 12, 2011

Budget reality check. Is $150,000 typical

Anyone would think the budget had frozen the income limits for getting family tax benefits at $150,000.

Talkback radio was alive with calls about it the day after the budget. Was a family income of $150,000 high or typical?

Shadow Treasurer Joe Hockey thought it was typical. “$150,000 a year for a family is certainly not rich Australia, it is very much middle Australia,” he told the ABC. “Besides I want people to aspire to earn $150,000 or more.”

The budget documents themselves say that for the next two years the cut-off for getting Family Tax Benefit B, paid parental leave and dependency tax rebates will be frozen at $150,000. That’s $150,000 of personal, rather than family income - anything but typical.

The cut-off for getting the baby bonus will be frozen at $150,000 of family income and the cut-off for getting Family Tax Benefit A will be frozen of at $94,316 of family income, increased by $3796 for each additional child after the first.

What the budget doesn’t make clear - but should - is that these cut-offs are already frozen...

Labor introduced the $150,000 ceilings in 2008. Before that Family Tax Benefit B and other payments could go to the families of millionaires.

In its 2009 budget it froze indexation of those benefits and also Family Tax Benefit A for three years.

Since then anyone whose income has sailed through the ceiling has lost the benefit.

This Budget extends the freeze for a further two years.

Although booked as a saving, it changes nothing. The $150,000 cut-offs have never been indexed. The $94,316 cut-off hasn’t been indexed since 2009.

(The benefits themselves will still be indexed. That hasn’t changed either. Family Tax Benefit A will climb by between $113 and $146 in July, Family Tax Benefit B by between $66 and $95.)

The number of families who’ll be shut out of benefits as a result of the extension when their income climbs is relatively small.

Around 1.9 million families receive Family Tax Benefit A. Treasury believes that in 2012-13 the 31,000 best-off of them will lose the benefit.

Around 1.6 million families receive Family Tax Benefit B. Treasury believes the best-off 9000 of them will lose the benefit.

Some 700 families will lose the baby bonus and just 17 families will lose paid parental leave.

As to the contention that they are typical, or typical Sydneysiders, the tax statistics show NSW residents are far from Australia’s highest earners. On average Western Australians and ACT residents earn more.

In 2008-09 the average NSW resident earned $55,300. In Point Piper and Darling Point the average was $176,400, but away from the harbour it was much less.

Published in today's SMH

The Australian on middle-class welfare. It used to oppose it.

UPDATE: Matt Cowgill:

"median gross household income was $67 003 a year, less than half what the $150k-$200k “battlers” of News Ltd’s imagination scrape by on"

"Mr Gray, the man in the Daily Telegraph’s story, earns $150 000, which would put him in the top 3% of taxpayers by income"

Related Posts

. TaxWatch on the budget changes

. Budget 2010-11 reviews: Mostly favourable

. Tax stats on who earns what where