When the 2018-19 Federal Budget was released, it introduced a list of new tax items as part of the Personal Income Tax Plan. This may help you understand how these measures affect you.

So what are the new measures?

  • A new low and middle income tax offset to provide immediate tax relief of up to $530. This will apply after your tax return for each individual year has been lodged, up until 2021-22.
  • An increase in income tax rate thresholds during the next seven years. This means you, as an individual taxpayer, will pay less tax. This change originally took place on 1 July 2018 and then there will be more changes in 2022-23 and 2024-25. This ensures that you may stay in the 32.5% tax bracket.
  • To simplify the whole tax system, a reduction in the number of tax brackets, from five brackets to four, will happen in 2024-25.

What are the increases in the income tax rate threshold?

There will be a whole bunch of different tax thresholds over the next 25 income years. All these changes apply to residents, foreign-residents and working holidaymakers.

PAYG withholding rates and schedules will be updated to include the changes.

This is the list of increased income tax thresholds:

  • For 2018 to 2022 income years
  • The 32.5% tax bracket will be increased from $87,000 to $90,000
  • For the 2022-23 and 2023-24 income years, the top threshold of
    • The 19% tax bracket will increase from $37,000 to $41,000
    • The 32.5% bracket will increase from $90,000 to $120,000
  • For the 2024-25 income year and onwards, the 32.5% tax bracket will increase from $120,000 to $200,000

What is the new low income tax offset?

The new low income tax offset will apply for 2022-23 and later income years.

This will replace both the current low income tax offset and the low and middle income tax offset.

Individuals that have a taxable income that doesn’t go over $66,667 will be eligible for the new low income tax offset.

The amount of the new low income tax offset is $645, reduced by:

  • 6.5% of the amount of your income if it is over $37,000 but does not go over $41,000
  • Another 1.5% if your income is above $41,000
Categories: Tax