Young and working Australians will spend the next decade bearing the brunt of higher taxes to pay for essential services and repair the budget bottom line, with the Albanese government facing politically charged choices between tax relief and deep cuts to spending.
A report released on Thursday by the independent Parliamentary Budget Office on the expected state of the budget out to 2035-36 argues that while the nation’s finances are currently sustainable, younger Australians will be the hardest hit by record levels of personal taxation.
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Treasurer Jim Chalmers is due to release the final numbers for the 2024-25 budget by the end of the month. He is expected to confirm the budget deficit for the last financial year to be in single digits rather than the $27.6 billion forecast in March.
The nation’s average personal income tax rate will climb from less than 25 per cent this year to more than 27 per cent by 2035-36.
Personal income tax is forecast to account for 47.7 per cent of total government revenue this financial year. By the middle of next decade, without any change, the government will depend on working people for 53 per cent of its revenue.
Chalmers revealed two tax cuts for all workers in the March budget. The cuts start from the middle of next year.
Over this period, the budget is forecast to gradually make its way back to balance, largely due to a 90 per cent increase in personal income tax collections, which are on track to reach almost $682 billion.
Bracket creep – the process by which people pay a larger proportion of income in tax as their wage rises – will repair the budget, with the burden falling increasingly on younger people.
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