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Personal Income Tax changes
The Government has proposed to increase the Low Income Tax Offset and bring forward the legislated stage 2 individual tax changes from the 2022-23 financial year to 2020-21, as shown below;
| Tax rates and income thresholds | ||
| Rate | 2019-20 | 2020-21 (new) |
| Nil | $0 – $18,200 | $0 – $18,200 |
| 19% | $18,201 – $37,000 | $18,201 – $45,000 |
| 32.5% | $37,001 – $90,000 | $45,001 – $120,000 |
| 37% | $90,001 – $180,000 | $120,001 – $180,000 |
| 45% | $180,001 + | $180,001 + |
| Low and middle income tax offset (LMITO) | Up to $1,080 | Up to $1,080 |
| Low income tax offset (LITO) | Up to $445 | Up to $700 |
Individual Tax Rates
The proposed bring forward of the stage 2 legislated individual tax rate changes take effect retrospectively from 1 July 2020. The stage 2 changes to the tax rates involve increases to the thresholds of the following tax brackets;
- 19% tax bracket to increase from $37,000 to $45,000, and
- 5% tax bracket to increase from $90,000 to $120,000
At this stage, there is no proposed date for these changes to start and won’t start until it has been passed through the Parliament & Senate.
Once these changes have been implemented, this will reduce the tax withheld from the individual’s pay which will increase the amount in their pocket. The total tax adjustments for the period from 1 July 2020 to the date when this is passed will not be paid in a lump sum but rather over the remainder of the year to 30 June 2021.
The proposed tax savings for individuals with the bring forward of the stage 2 tax rate cuts are;
| Taxable income | Current tax payable | Proposed tax payable | Tax saving^ |
| $20,000 | $0 | $0 | $0 |
| $40,000 | $4,467 | $3,887 | $580 |
| $60,000 | $11,067 | $9,987 | $1,080 |
| $80,000 | $18,067 | $16,987 | $1,080 |
| $100,000 | $25,717 | $24,187 | $1,530 |
| $120,000 | $34,117 | $31,687 | $2,430 |
| $140,000 | $42,097 | $39,667 | $2,430 |
| $160,000 | $49,897 | $47,467 | $2,430 |
| $180,000 | $57,697 | $55,267 | $2,430 |
| $200,000 | $67,097 | $64,667 | $2,430 |
Low Income Tax Offset
The Government has proposed an increase to the Low Income Tax Offset (LITO) for individuals with a taxable income of up to $37,000 from $445 to $700. Due to the proposed LITO increases, the rate of reduction has also increased so that the offset still cuts out at $66,667. Below is a table for the LITO and its reduction.
Tax and tax planning can be a complicated and evolving process – it’s important to have an accounting partner who knows the game, is across all legislation and understands your situation and what you want to achieve. If you would like to know more about our tax planning services and how you could reduce your tax exposure, please call our office on (08) 8172 1444 or email our friendly team.