It’s MYEFO time! In case that acronym means nothing to you, it stands for the Mid-Year Economic and Fiscal Outlook and marks the half-way milestone for the nation’s budget, which of course ends on June 30. And there’s good and bad news.
The good news is that the near $14 billion deficit Dr Jim Chalmers predicted for this financial year in the May budget is likely to be only $1.1 billion. Of course, if Treasury screwed up that ‘guess’ back in May, why should we believe this ‘guess’?
Answer is — you can’t.
That’s the good news.
The bad news is that this drop in the expected deficit was created by a huge tax take from Dr Jim’s tax office.
Importantly, the AFR says that there has been a “… $30 billion surge in income tax revenue since May helping drive the budget towards a second successive surplus,” thanks to what we’re giving out of our income to the government.
A lot of this has come from bracket creep. Bracket creep occurs when your income increases via higher wages or profits, so you get pushed into a higher tax bracket. As a result of this, the tax man shares in your good fortune by taking more of your higher income as more tax.
The ABC points out that “…an extra $64.4 billion [will be] flowing to government coffers in the next four years but that likely won't be seen in household budgets in the next year.”
But there’s some future good news that all of this surprise big tax take will mean in the next May Budget. Dr Jim is bound to stick to the promised stage three tax cuts. In fact, the Treasurer has said tax brackets will be changed so some of this tax take will go back to us taxpayers. These will start in July 2024, which, of course, makes sense as the Albanese government has to go to the polls by around mid-2025.
However, the future won’t be all give for Dr Jim, with late taxpayers set to be slugged in the future.
“Among the new measures in the update is a move to end the ability of businesses and workers who don’t pay their tax on time to deduct any late fees from July 1, 2025,” the AFR revealed. “The measure will raise $500 million a year.”
Related interest slugs are now tax deductible, but they will go! Also, passport fees will go up from $48.75 to $373.75 for a 10-year passport.
The bottom line is if the economy keeps doing well and commodity prices remain high, our budget will move into surplus, which will make it easier for Dr Jim to give tax ‘gifts’ in the May Budget next year.
In a year before an election, budget decisions are often about winning friends and influencing voters, so pity help you if you’re seen as a non-Labor supporter. Next year’s budget is bound to target disaffected former Labor voters, so good low- and middle-income tax cuts will be on the way.