The Sydney Morning Herald from Sydney, New South Wales, Australia • Page 1

jr 'v FRIDAY, AUGUST 14, 1998 No. 50,218 RRST PUBLISHED 1831 $1 PJlfq1 1 V. 1 pY THE ffloxE GOOD CM TAX I I 1 1 1 fill I II I I I SPECIAL LIFTOUT HOW THE CHANGES AFFECT YOU AND YOUR FAMILY uussi- Howard gambles all on tax windfall for Middle Australia If v) -m We THE ESSENTIALS WHO WINS, WHO LOSES HOW IT AFFECTS YOU THE KEY CHANGES The winners Single-income families Benefit from new tax scales, extension of income-free thresholds under family tax plan, better child-care help, child care excluded from GST, new private health insurance rebates. Pensioners Extra tax rebates, 4pc rise in pensions, loosening of poverty traps, refundable franking credits, health insurance rebates. The Bush Diesel fuel credit, cut in cost of fuel used in heavy transport from 43c to 18c a litre, cut in cost of exports.

Small business Provisional tax scrapped, quarterly repayment system simplified, rollover relief extended, help with GST costs. The States Access to big growth tax with GST revenue to replace some grants, abolition of irksome taxes and veto over rise in GST. The losers Single Taxpayers Smallest benefits, in dollar and percentage terms, from new tax scales and family package. Housing and Tourism sectors Lobbied hard but failed to win GST-free status. Both face problems adjusting to life under new tax.

Trusts Two-stage crackdown, immediate curb on income-splitting and other ruses, and future move to tax trusts as per companies. Small business Hardest hit by a $3bn clamp on the black economy. Charities Commercial activities to be taxed. Tax verdict: glittering but risky ALAN RAMSEY Here's the rub. John Howard wants your vote in two months' time.

To get it, he is offering $13 billion worth of tax cuts in two years' time. Think about it: Two months versus two years. There is more. Along with the $13 billion in tax cuts from July 1, 2000 comes a new tax that will cost you $27 billion. Thus, on average, for every one dollar in lower income tax, you'll pay two dollars in the new goods and services tax.

Not much of a bargain, is it? Alan Ramsey Page 11 ROSS GITTINS Goodness. Plodding John Howard has come up with a glittering package. This is tax reform as we dream of it: every one of us would be better off. In a more trusting age, it would be a sure-fire election winner. In these times of disillusionment, however, many voters will be asking: is it too good to be true? How could it be possible to leave everyone a winner? It's simple: Mr Howard plans to raid the cookie jar.

He'd dip into the Budget surplus to the tune of $7 billion a year. Ross Gittins Page 9 MAX WALSH Peter Costello's tax reform program represents the most expensive election promise in history. If implemented as outlined yesterday, it will cost more than $5 billion annually. Because the Budget has been returned to surplus, this fresh fiscal commitment does not look irresponsible. However, it is obvious why Mr Howard has remained committed to selling down Telstra, even though this carries political risks in the present environment Max Walsh Page 9 COLUMN TODAY ON PAGE 3 tax rates la i.

'-v I i T7 The new income THE NEW SCALE Taxable income Tax rate 0 17 30 40 $75,001 plus 47 The key changes By MICHAEL MILLETT Chief Political Correspondent The Federal Government has promised average families will be about $50 a week better off under its sweeping tax changes, which offer income tax cuts, increased family payments and a new health insurance rebate scheme to offset a 10 per cent GST. The "family friendly" package, released yesterday, includes extensive reworking of the income tax scales to stop middle-income earners climbing into the top tax bracket. Commonwealth-State relations are overhauled, with the States offered all GST revenue in exchange for the scrapping of some of their indirect taxes, such as NSW's bed tax, and an end to the financial grants system. The Prime Minister described the reforms, to be the centrepiece of the Government's re-election platform, as "the biggest single remake of the Australian tax system since Treasury modelling in the package shows that the biggest winners in percentage terms will be single-income families, particularly those on about $60,000 to $75,000, who gain in some cases more than $100 a week. But Mr Howard denied that the Government was trying to "stereotype a particular pattern of family behaviour" or gear its package towards the more affluent.

"These are tax scales for middle Australia; these are tax scales for battlers; they're tax scales for somebody who wants to get off their tail and go from $25,000 a year to $40,000 a year by working harder and knowing they won't go into a higher tax bracket" Mr Howard defended the Government's decision to dip into future projected surpluses to pay for the full package, saying the depletion was modest and a public return on the financial discipline of the past two years. The Government also faces inevitable pressure to modify its plan to ensure its passage through the Senate. The Opposition immediately dismissed the changes as grossly unfair, saying they would benefit wealthy families four times as much as struggling families. The Democrats are pressing for changes to make the income tax plan more equitable. Business generally welcomed the package although there was intense criticism from the building and tourism sectors, which will be hit by the GST.

The main welfare lobby group, ACOSS, said the changes posed too many risks for low- and middle-income earners. THE LLOYDS OF DEE WHY Family of three on one income of $50,000 Would get a tax cut of $47.88 a week Verdict: 'I was very impressed he will get my vote' 12 to 2- Mainy fine with Chance of an isolated winds tending westerly. 20. Richmond 6 to 21. the south-east.

am. Sunset 5.24 pm. 1 Lj I i Nt 10 per cent GST To come into operation in July 2000, applying to everything bar education, health, child-care services, charitable activities, local government rates and water and sewerage charges. $13 bn in personal tax cuts Tax-free threshold to rise to $6,000, and all marginal rates (except the top rate of 47 percent) to fall. 30pc tax rebate or benefit To apply to health insurance premiums.

Overhaul of Commonwealth-State relations Full GST revenue to be given to the States, with abolition of nine State indirect taxes. GST compensation package Includes 4pc rise in pensions and allowances, extra $250 rebate for pensioners and self-funded retirees, and income-tested savings bonus of up to $3,000. Family assistance Totals more than $2bn a year, doubles tax-free threshold for single-income families, streamlines payments and allows parents to earn more income before benefits are withdrawn. Changes to tax for cigarettes and alcohol Will lead to 45c rise in $7 pack of cigarettes and about 50c for carton of full-strength beer. The Good Tax Guide liftout How the tax changes affect you and your family, in an easy-to-read format.

A special 12-page liftout with today's Herald. As forecast, the Government will scrap the wholesale sales tax system, replacing it with a 10 per cent GST, applied to most essentials, including food. Health, education, child care, charities and local government rates will be the only GST-free areas. Other key features are: Income tax cuts totalling $13 billion, with the tax-free threshold lifted to $6,000 and all marginal rates except the top one of 47 per cent lowered, leaving 81 per cent of Australians paying no more than 30c in the dollar. A $2.5 billion family assistance package which will involve higher tax-free thresholds for single income families These are tax scales for middle Australia; these are tax scales for battlers; they're tax scales for somebody who wants to get off their tail and go from $25,000 a year to $40,000 a year by working harder and knowing they won't go into a higher tax bracket.

JOHN HOWARD and an easier income test for family allowances. A new 30 per cent tax rebate or benefit for health insurance premiums that ill not be means tested and will be worth about $600 a year for a family with a policy. A GST compensation package for low-income earners, including a 4 per cent rise in pensions and a bigger area free of the income test. A diesel fuel credit scheme, cutting the cost of fuel used in heavy transport from 43c a litre to 18c, as a major lure for country and regional voters. The scrapping of provisional tax, extended rollover relief and a streamlined quarterly payments system for business.

A two-stage crackdown on trusts, an attack on elaborate salary packaging, and possible further business tax measures, including a 30 per cent tax rate. The new health insurance incentives will apply from January next year, and the GST and the new tax scales from July 2000, subject to legislation passing the Senate. PAGE 18: Editorial Unfinished tax business. private health cover, either as a tax rebate or a cash benefit to coincide with regular premium payments. The scheme is worth $600 a year for a family with a $2,000 health policy.

For a single person with full hospital cover but covered under a scheme with a $250 excess, the rebate or benefit would be about $440 a year and twice that for a family. The size of the subsidy $4.8 billion over four years means the health funds will receive more largesse than the $3.8 billion promised to public hospitals over the next five years. LIFTOUT PAGE 3: Full report Weather today sydney cloudy periods. shower. Light Liverpool 8 to NSW: Rain in Sunrise 6.36 1 IT Circus Z'vf i TOMORROW Sydney Showers INSIDE witn soutn-east to easterly winas and a maximum of 18.

NSW: Showers, mainly on the south coast. FULL DETAILS Page 23. Arts Bridge x-- a Classified Amusements THE OLD SCALE Taxable income $50,001 plus Tax rate 0 20 34 43 47 If' Ask anyone about our home loan specialists and you'll find they have a reputation for sound suggestions, not fast talk. And that's what you can expect. If you're serious about a home loan, refinancing or investing in residential Call any day.

Even Sundays. 8am to midnight (EST) 7 days. mm IN BUSINESS How the markets big business reacted to the package PLUS Analysis from Max Walsh and Stephen Bartholemeusz PAGE 25 Now private health cover will earn a 30 rebate Lloyds' vote of approval The Lloyd family lives in a caretaker's residence with subsidised rent at the Dee Why school where Matthew Lloyd teaches. They run an aging Ford Laser and their unit is rented while they live at the school. A single-income family on $50,000, they are the Middle Australia voters John Howard needs to woo to win the election -and it appears he has succeeded.

Under the changes, the Lloyds' tax-free threshold jumps from $5,400 to $13,000, and instead of 43 per cent tax, Mr Lloyd will pay 30 per cent on most of his earnings. Sarah Lloyd, 32, who is expecting their second child -Marcus is two said that while they voted Liberal last time, they were swinging voters. "1 was very impressed with some of the things that will affect us, such as bank account taxes, private health insurance he will get my vote." Mr Lloyd, 34, said it appeared to be a much simpler system for both individuals and business. But he warned the Liberals: the party must pay for the tax advertising campaign. LEOME LAMONT Editorial ..92822822 Classified .24 132535 14,15 General ....9282 2833 leogiifS) property, call and arrange for an AMP Danking Specialist to visit.

Your consultation is free and we can have someone around to visit you at your convenience So it shouldn't take long to find out ours is the right home loan for you. 13 30 30 Banking By LAURA TINGLE Political Correspondent Health is set to be one of the big battlegrounds of the 1998 election campaign after the Coalition yesterday boosted its support for private health insurance with a $1 billion-a-year subsidy to the ailing industry. From January next year, tax rebates paid to lower-income earners for private health cover will be abolished, though the 1 per cent Medicare surcharge on people earning more than $70,000 who do not have private cover will remain. Under the new scheme, taxpayers, regardless of income, will receive a 30 per cent subsidy on Matthew, Sarah and Marcus Lloyd would pay less tax. Photograph by ROBERT PEARCE ISSN 0312-6315 Business 25 Olympics 16 PHONE uossworas 2.6 opinion la Index .....40 Law Notices 29 Personal Notices 31 Metro Letters 18 Sport 40 Internet www.smh.com.au Home delivery (02)92823800 7 -7- The credit provider is AMP Bank Limited ACN (181 596 009.

Approval subject to AMP Bankings lending guidelines. Other fees and charges apply. 17 $2 Lottery 6630 35 Television. 29 Obituaries 31 World AMI'll 1 ihS 7.