Budget 2014: Here's How The Deficit Tax Will Work

Prime Minister Tony Abbott (Photo: Getty Images)

The Temporary Budget Repair Levy, called the deficit levy in pre-budget leaks, targets higher income earners.

Treasurer Joe Hockey says the measure will raise $3.1 billion over the three years the money will be collected.

This is how it works:

From July 1 until June 30 2017, the Temporary Budget Repair Levy will be payable by those whose taxable income exceeds $180,000 at a rate of 2%.

This catches about 400,000 people.

The key words here are taxable income. Deductions to take income under $180,000 will be keenly sought.

However, it’s important to note that the extra 2% tax is only charged on dollars earned over $180,000.

For example:

Those with a taxable income of $180,000 or below will not pay the levy but those earning $200,000 will pay 2% of $20,000, or $400 of levy and those on $300,000 will pay 2% of $120,000, or $2,400.

Here’s what you’ll pay:

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