Budget 2016: Middle-income earners to receive income tax relief, as government confirms there will no change to negative gearing

Australian taxpayers who earn more than $80,000 will receive some tax relief as a result of the 2016 federal budget.

As widely expected, the federal government has revealed plans to increasing the upper limit of the middle personal income tax bracket from $80,000 to $87,000 from July 1, 2016, in a bid to combat the effects of bracket creep.

Treasurer Scott Morrison said in statement the change will stop around 500,000 taxpayers from hitting the 37% marginal tax rate in the 2016-17 financial year.

“Middle income Australians are bearing a growing burden as they see their average tax rate rise, punishing hard work, hindering growth, limiting opportunity and hampering innovation,” Morrison said.

“We will therefore give hard working Australians greater incentive to earn more without being taxed at a higher rate.”

In his budget speech Morrison will describe the change as “modest” and “affordable”, saying the $3.95 billion reduction in revenue over four years that will result from the change is “fully offset by the revenue and integrity measures contained in the budget”.

He will also use his budget speech to confirm the government’s position that it will not push for changes to negative gearing arrangements.

“That would increase the tax burden on Australians just trying to invest and provide a future for their families,” he will say.

“Those earning $80,000 a year in taxable income make up two thirds of those who use negative gearing. They are teachers, nurses, police officers, defence force personnel, office workers and tradespeople.

“We do not consider that taxing these Australians more on their investments, including increasing their capital gains tax, and undermining the value of their own home and investments is a plan for jobs and growth.”