This is our first newsletter in a series over the next few weeks, detailing the key changes to personal income tax that have been announced in The 2020 Federal Budget of 6 October.

For a summary of all of the budget announcements, see here.

One of the highlights was that personal income tax cuts already legislated are going to be brought forward. This will deliver tax relief to low and middle-income earners for the 2020-21 income year with much of the benefit going to those on incomes below $90,000 per annum.

Bringing forward the Personal Income Tax Plan

personal income tax savings

Immediate personal income tax relief for individuals providing an indicative tax savings of $1,935 if you earn $45k or a savings of $2,295 if you earn $90k (compared to 2017/18 tax year).

This is effective from 1 July 2020 having been brought forward from 1 July 2022.

 

Retaining the Low and Middle Income Tax Offset (LAMITO) for 2020-21 and
Increasing the Low Income Tax Offset (LITO)

personal income tax offsetThe Low and Middle Income Tax Offset — capped at $1,080 — will be retained for the 2020–21 income year and the LMITO will be received on assessment after individuals lodge their personal income tax returns for the 2020–21 income year.

Taxable income

LAMITO Offset

$37,000 or less  $255
Between $37,001 and $48,000 $255 plus 7.5 cents for every dollar above $37,000, up to a maximum of $1,080
Then between $48,001 and $90,000 $1080
Finally between $90,001 and $126,000 $1,080 minus 3 cents for every dollar of the amount above $90,000
From 1 July 2020, the maximum amount of the Low Income Tax Offset will increase from $445 to $700 and is summarised below.

Taxable income

LAMITO Offset

$37,000 or less  $700
Between $37,001 and $45,000 $700 minus 5 cents for every dollar of the amount above $37,000
And between $90,001 and $126,000 $325 minus 1.5 cents for every dollar of the amount above $45,000

 

Personal Income Tax Thresholds

Rate

(%)

2017-2018 tax thresholds

Income range ($)

Current tax thresholds

From 1 July 2018

Income range ($)

New tax thresholds

From 1 July 2020

Income range ($)

Rate

(%)

New tax thresholds from 1 July 2024

Income range ($)

Tax free

0 – 18,200

0 – 18,200

0 – 18,200

Tax free

0 – 18,200

19

18,201 – 37,000

18,201 – 37,000

18,201 – 45,000

19

18,201 – 45,000

32.5

37,001 – 87,000

37,001 – 90,000

45,001 – 120,000

30

45,001 – 200,000

37

87,001 – 180,000

90,001 – 180,000

120,001 – 180,000

45

>200,000

45

>180,000

>180,000

>180,000

LITO

Up to 445

Up to 445

Up to 700

LITO

Up to 700

LMITO

Up to 1,080

Up to 1,080*

LMITO

* The LMITO will only be available until the end of the 2020-21 income year.

Even with quick passage of legislation, the tax measures will be backdated by around four months. As a result, reduction in PAYG tax for the remainder of the financial year will be around 1.5 times the ongoing rate giving you instant tax savings without having to wait until lodgement of your 2021 personal income tax return.

 

Increasing the Medicare Levy low-income thresholds

personal income tax medicare levyOur Government has increased the Medicare Levy low-income thresholds for singles, families, and seniors and pensioners from 2019-20. The increases take account of recent movements in the consumer price index.
This way low-income taxpayers generally continue to be exempted from paying the Medicare levy on their personal income tax return. The Medicare Levy low-income thresholds have increased as follows:

    • For singles, the threshold has increased from $22,398 to $22,801.
    • The family threshold has increased from $37,794 to $38,474.
    • For single seniors and pensioners, the threshold has increased from $35,418 to $36,056.
    • The family threshold for seniors and pensioners has increased from $49,304 to $50,191.
    • For each dependent child or student, the family income thresholds increase by a further $3,533, instead of the previous amount of $3,471.

Full details are available here https://budget.gov.au/

Still have questions? We are here to help.

For assistance with your personal income tax return, and questions relating to whether you or your family qualify for any of the above measures, please contact us at consulting@austasiagroup.com.

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