Australia’s tax system overhauled

Australia’s tax system has had a major overhaul, for the new financial year which starts on Sunday.

That has included the insertion of a radically new trickle down device, to  spread  some of  Australia’s vast mineral wealth, to the broader community.

That, of course, rests  on the new  Minerals Resource Rent Tax, which is still to be tested in the High Court.

But  Wayne Swan, who designed the minerals tax is confident that it will  be robust enough, to survive that challenge, launched by the West Australian mining magnate, “Twiggy” Forrest.

The minerals tax – and the still controversial new carbon tax – both come into effect on Sunday,  July 1.

Those two changes, alone, would add up to the biggest reform the nation’s tax system has seen, since John Howard’s  “never, ever” Goods and Services Tax was introduced, on July 1, 2000.

But there is much more to the present overhaul, than that.

There will, for example, be tax cuts, for everyone earning up to $80,000 a year,  increased pensions and benefits, and completely new payments,  like the Schoolkids Bonus.

Those on higher incomes, though, will mostly miss out, on the promised benefits.

These changes might well stimulate the economy.

That’s because this overhaul will put more cash into the pockets and purses of  the relatively less well off Australians.

There is not much that economists agree upon, these days.

But they do admit that low  to middle income people have “a greater propensity to spend”  than the rich.

So much of that extra money,  from those tax cuts and higher benefits, might soon be setting the nation’s cash registers ringing again, after their long, oppressive silence, since onset of  the global financial crisis, back in 2008 .

Mr Swan did not mean the budget he introduced back in May  to be stimulatory.

The Treasurer, himself, was quite specific about that.

And he backed  his words, at the time, by promising to produce a surplus, in the new financial year.

But the stimulatory angel is buried in the detail, of Mr Swan’s tax changes,  anyway.

His decision to treble the tax free threshold, alone, would see to that.

The new threshold will be $18,200.

So every worker, earning up to $80,000 a year will pay less tax.

Pensioners – and others on benefits – have already had extra payments, to help them meet the higher electricity bills – and other extra expenses –  that will  come with the new carbon tax.

There will also be a new Schoolkids Bonus, paid each January and July, from 2013.

In short, these are  clever changes, just  right  for the present, still difficult times.