The New Tax System introduced on 1 July 2000 represented a major restructuring of the Australian tax system. This restructuring continued in the 2003-04 Budget with tax thresholds being further adjusted.

In this Budget, the top two tax thresholds have been specifically targeted to ensure that the tax system continues to support rewards from working.

The combined effect of three stages of tax reform has been to deliver significant tax cuts for all Australians.

• Taxpayers earning $20,000 paid $2,770 in tax prior to The New Tax System (excluding the Medicare levy) whereas taxpayers on that income would now only pay $2,145, a reduction of around 23 per cent.
• For taxpayers on $50,000 (around average weekly earnings) their tax reduction is around 21 per cent.

• By 1 July 2005, a taxpayer on $90,000 who paid $32,902 in tax prior to The New Tax System (excluding the Medicare levy) will pay $26,912 in tax in 2005-06, a reduction of around 18 per cent.

Strengthening Australia’s international competitiveness

Many highly skilled Australians — including our young people — are internationally mobile and can choose to work anywhere in the world. The personal income tax system is one factor in Australian skilled workers’ decision to seek work overseas and in skilled people from other countries considering coming to work in Australia.

The significant increase in the top tax threshold will improve Australia’s ability to compete as a preferred place to live and work.