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Income tax cuts pass Parliament

by Knowledge Shop Editor, on 04/07/19 20:53

The promised income tax cuts have passed the Senate including the controversial third wave reducing the tax rate for incomes up to $200,000 to 30% in 2024.

Supported by Senator Jacqui Lambie and the Centre Alliance, the amending legislation passed without amendment. 

Personal income tax cuts

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).

 

Tax thresholds

Tax rate

From 1 July 2018

From 1 July 2022

From 1 July 2024

0%

$0 - $18,200

$0 - $18,200

$0 - $18,200

19%

$18,201 - $37,000

$18,201 - $45,000

$18,201 - $45,000

30%

 

 

$45,001 - $200,000

32.5%

$37,001 - $90,000

$45,001 - $120,000

 

37%

$90,001 - $180,000

$120,001 - $180,000

-

45%

>$180,000

>$180,000

>$200,000

LMITO

Up to $1,080

 

 

LITO

Up to $445

Up to $700

Up to $700

 

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 increased

From 2018-19 until 2021-22, the low and middle income tax offset (LMITO) has increased from a maximum amount of $530 to $1,080 per annum and the base amount increased from $200 to $255 per annum.

The LMITO provides 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 the individual has lodged their tax return. 

Low income tax offset 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 The increased LITO will be withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000, instead of at 6.5 cents per dollar between taxable incomes of $37,000 and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 LITO will then be withdrawn at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.

This package revises the previously legislated seven year income tax plan.

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