MOST Australian workers will get an extra $6 a week from July 1 this year as part of a $21.7 billion tax-cutting bonanza unveiled by Peter Costello in the fderal Budget.

Mr Costello reduced the base rate of tax from 17 per cent to 15 per cent and lifted the top two tax thresholds, eliminating the effects of "bracket creep" felt by most Australians who have had a pay rise in recent years.
And in a surprise extra bonus for taxpayers, the Treasurer abolished the 10 per cent superannuation surcharge.

Under the reforms, those earning between $25,000 and $55,000 a year will receive an extra $6 a week in their pay packets. Those on $100,000 a year will get $62 more per week.

All taxpayers receive the two per cent drop in the 17 per cent marginal tax rate.

Mr Costello unveiled a surplus well below expectations at $8.9bn but forecast strong economic growth of 3 per cent for the coming year, an easing in housing and consumer spending, moderate inflation and low unemployment.

While the Budget, which Mr Costello said was "framed for the future", contains massive reform of the welfare system that will affect Australians for years to come, pockets will have extra cash in a matter of weeks.

The Treasurer said the tax cuts would drive growth in the Australian economy and boost the incentive to work at a time when an ageing population and an over-reliance on welfare were the economy?s bigger challenges.

"We should now aim for an economy where every Australian who wants to work can find it," Mr Costello said.

"These cuts will assist low-income earners, boost disposable incomes, reward participation and hard work."

The two big threshold leaps will come into full effect from July 2006 when:


THE 42 per cent threshold will be lifted to $70,000, up $12,000 from its current level;

THE top 47 per cent threshold will jump from $70,000 to $125,000.
Mr Costello said it was the Government?s mission to lower taxes as "far as is prudent".

"These changes ensure that more than 80 per cent of taxpayers face a top marginal tax rate of 30 per cent or less over the (next four years)," he said.

"From July 1 July 2006, the top marginal rate will apply to only 3 per cent of taxpayers."

The threshold increases are being rolled out in two annual installments in an attempt to stop the economy from overheating and reduce pressure on interest rates.

As part of tax changes announced in last year?s Budget, from July 1 this year, the 42 per cent threshold will increase to $63,001 and the 47 per cent threshold will rise to $95,001.

In another measure aimed at seniors, those eligible for the Senior Australian Tax Offset will now pay no tax on income up to $21,968 for singles and $36,494 for couples.

Less than a week after leadership tensions with Prime Minister John Howard, the Treasurer emphasised the Government?s economic achievements under his stewardship.

"I bring this Budget down at a time when more Australians are in work than ever before," he said.

"Our unemployment rate has fallen to a low unmatched for 28 years.

"This is not an accident. This is not a fluke. This is the outcome of sound economic management. Things could have been very different."