Tax cuts arrive, but have they already gone?

The Commonwealth Government's much vaunted tax cuts have come into force, along with a number of other changes announced in the 2008 budget.

As well as the tax cuts — which will net workers on an average income around $11.50 extra a week — a rise in the threshold for paying the Medicare surcharge, higher taxes on luxury cars and changes to the baby bonus, have all kicked in.

While the tax cuts were expected to give some relief to families grappling with higher living costs, Treasurer Wayne Swan admitted recently that the cuts will be swallowed by inflation.

"We understand that for many families they are doing it really tough and that the tax cuts will be used to make up for the increase in the price of petrol and so on, but we did what we could responsibly do and we did it because we understood the importance of assisting families in these circumstances," he said, speaking on the Nine Network's Sunday program.

While there is widespread belief that for many, the tax cuts have already been consumed by the rising cost of living, families in particular situations will be better off.

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If you are one of the Rudd Government's working families on $80,000 a year, then you can expect an extra $1100 in your pay packet this financial year. And if the $80,000 comes from the combination of two pay packets in your household rather than just one breadwinner, you'll be even better off.

Because of the increase in the tax brackets, a couple where one earns $55,000 and the other $25,000 for a combined $80,000 will be $1250 better off. The lower-income earner will have $450 more in their pay packet and the higher-income earner will have $800.

The new financial year also signals an increase in the childcare tax rebate from 30-50 percent which will boost the rebate limit per child from $4354 to $7500 per child. The baby bonus will also rise to $5000, but from October this year, it will be means tested and will be paid in fortnightly instalments.

Parents will also be able to claim a 50 percent rebate for up to $750 of education costs, such as computers and textbooks from July 1, but they must keep all receipts.

Many people who don't have private health insurance will also no longer have to pay the 1 percent Medicare level after the threshold changed. The annual earnings threshold is now $100,000 for singles and $150,000 for couples, up from $50,000 and $100,000 respectively.

Finally, pensioners — who many felt were left out of this year's budget handouts — will receive the $500 utilities allowance.

What changes?

Tax cuts:

• $30,000 yearly salary = $21.15 less tax per week
• $50,000 yearly salary = $14.42 less tax per week
• $80,000 yearly salary = $24.40 less tax per week

Medicare levy:
Threshold for payment of levy rises to $100,000 for singles and $150,000 for couples.

Family:

• Maximum tax rebate rises to $7500 per child from $4354.
• Education rebate of 50 percent up to $750 of expenses for each primary school child, $1500 for secondary school child.