Major Changes To Personal Income Tax

income tax threshold offsets australia
income tax threshold offsets australia

As announced in the 2018-19 Budget, the Government has legislated staged tax relief for low and middle income earners as part of a 7 year plan.

These changes are comprised of two components;

  1. The introduction of the new Low and Middle Income Tax Offset (LMITO),
  2. Personal income tax changes

The new Low and Middle Income Tax Offset (LMITO)

The new LMITO operates as a $530 reduction in tax payable if your taxable income is between $48,000 to $90,000. Once your taxable income exceeds $90,000, the LMITO is gradually reduced at a rate of 1.5 cents per dollar up to taxable income of $125,333.

Income Tax Rate changes

From 1 July 2018, the 32.5% bracket will expand from $87,000 to $90,000. Further changes to the tax thresholds have also been legislated for 2022-23 onwards to 2024-25.

The following table reflects the old 2019 tax rates & thresholds, and the new 2019 tax rates & thresholds as legislated by the Government as part of the 2018-2019 federal budget.

TAX RATE2018-2019

 (Old Rates)

2018-2019

(New rates)

0%$0 – $18,200$0 – $18,200
19%$18,201 – $37,000$18,201 – $37,000
32.5%$37,001 – $87,000$37,001 – $90,000
37%$87,001 – $180,000$90,001 – $180,000
45%$180,001 +$180,001 +

Example

Under the new legislated changes as outlined above, an individual earning $90,000 in the 2019 financial year will receive a tax saving of $665 as illustrated below.

 New Tax Rates  Old Tax Rates
Taxable Income              90,000              90,000
Tax on taxable income              20,797              20,932
PAYG Withholding(22,776)(22,776)
Medicare Levy                1,800                1,800
Low Income Tax Offset                     –                     –
Low middle income tax offset(530)                     –
  
Net Tax Payable / (Refundable)(709) (44)
Total tax saving                   665

If you are confused or have any questions about the Income Tax Threshold Offsets we encourage you to contact us on (02) 4353 2333 or complete the form below and we will get back to you with some help.