Budget hands Australians $21 billion in tax cuts

Brushing aside suggestions he was thinking more of his own future than that of the country, Treasurer Peter Costello last night handed Australians A$21.7 billion in tax cuts.

The size and scale of the cuts, believed to have been a last-minute addition to the Treasurer's 10th Budget, took Australia by surprise - but gave the low paid only a fraction of what the wealthy can expect.

Mr Costello declined to answer questions about his ambition to replace Prime Minister John Howard, now looming as a serious breach in the Government.

But the tax bonanza was last night already being seen in the context of the leadership, and eclipsed Mr Costello's less palatable plan to force solo parents and disability pensioners off benefits and into the workforce.

Mr Costello said delivering tax cuts was every Treasurer's dream. He realised it by lifting the threshold at which the escalating scale of tax rates bite into income, capping the maximum rate for 80 per cent of Australian taxpayers at 30 per cent.

The base rate of 17 per cent has been cut to 15 per cent, and the level at which the top rates bite into the pay packets of the highest-paid has been dramatically increased.

The biggest gains will come for those at the top.

For those on wages of between A$25,000 and A$55,000 a year, the cuts will deliver just A$6 a week.

People earning A$65,000 to A$95,000 a year will get between A$17.50 and A$36 a week with the 42 per cent threshold kicking in at A$63,000.

Those earning above A$95,000 will attract the top rate of 47 per cent, handing them an extra A$62 a week.

More will come for the affluent next year, with the 42 per cent threshold rising again in July 2006 to A$70,000 and the 47 per cent trigger increasing to A$125,000.

In last year's Budget tax cuts of A$14.7 billion were made.

Personal tax rates

New Zealand

up to $38,000 19.5c
$38,001-$60,000 33c
$60,001 and over 39c

Australia (from July 1)

up to A$6000 nil
A$6001- $21,600 15c
A$21,601- $63,000 30c
A$63,001- $95,000* 42c
A$95,001 and over* 47c

*Thresholds rise next year.