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