As anticipated, the Budget celebrated the surplus with a $19.5bn package of personal income tax cuts for Australian residents. This package revises the legislated seven year income tax plan.
The personal tax changes mean a tax saving of $855 for someone on an annual taxable income of $45,000 per annum until 2022, then $1,080 until 2024 onwards (check the tax relief calculator).
This round of tax cuts:
Increases the top threshold of the 19% personal income tax bracket to $45,000 from 1 July 2022
Reduces the 32.5% marginal tax rate to 30% from 1 July 2024-25
Low and middle income tax offset (LMITO) increased
The low and middle income tax offset (LMITO) will increase from a maximum amount of $530 to $1,080 per annum and the base amount will increase from $200 to $255 per annum.
The LMITO will provide a reduction in tax of up to $255 for taxpayers with a taxable income of $37,000 or less. Between taxable incomes of $37,000 and $48,000, the value of the offset will increase at a rate of 7.5 cents per dollar to the maximum offset of $1,080. Taxpayers with taxable incomes between $48,000 and $90,000 will be eligible for the maximum offset of $1,080. From taxable incomes of $90,000 to $126,000 the offset will phase out at a rate of 3 cents per dollar.
The LMITO is received after you have lodged your tax return.
Low income tax offset (LITO) increased
From 1 July 2022, the Government will increase the low income tax offset (LITO) from $645 as legislated, to $700. The increased LITO will be withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000, instead of at 6.5 cents per dollar between taxable incomes of $37,000 and $41,000 as previously legislated under the plan. LITO will then be withdrawn at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.
Medicare levy thresholds increased
The Medicare levy low income thresholds for singles, families, and seniors and pensioners will increase from the 2018-19 income year.
More information
**The material and contents provided in this article contains general information and does not take into account your personal objectives, financial situation or needs. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, please contact Peer Wealth on (02) 8014 7608.
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