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Federal Budget 2020-21: Personal Tax

As expected, the Government has announced further tax relief for low and middle income earners building on last year’s Personal Income Tax Plan which is already legislated.

This relief is provided by way of:

  • from 1 July 2018 until 30 June 2022, a significant increase in the Low and Middle Income Tax Offset (LMITO)
  • from 1 July 2022, an increase in both the top threshold of the 19 per cent personal income tax bracket and an increase to the Low Income Tax Offset (LITO), and
  • from 1 July 2024, a reduction in the 32.5 per cent marginal tax rate to 30 per cent.

Changes to personal income taxes

Low and Middle Income Tax Offset and Low Income Tax Offset

The new LMITO, which applies from 1 July 2018 until 30 June 2022, currently provides a tax offset of up to $530 per year in addition to the LITO (which is a maximum of $445).

The Government has announced its intention to increase the maximum amount of the LMITO to $1,080 per year, to be phased in as set out in Table 1 below.  The first time that the benefit of this reduction in income tax will be received by affected taxpayers will be when they are assessed on their 2018-19 income tax return.

Table 1: Increase in Low and Middle Income Tax Offset for Australian tax residents

Taxable Income ($)  Revised amount of the LMITO ($)
37,000 or less 255
37,001 to 48,000 255 plus 7.5 per cent of excess over 37,000
48,001 to 90,000 1,080
90,001 to 126,000 1,080 less 3.0 per cent of excess over 90,000

From 1 July 2022, the LITO and the LMITO will merge into a new LITO.  The Government has announced in this year’s Budget that the maximum amount of this LITO will be increased from $645 (as currently legislated) to $700 per year, to be phased in as set out in Table 2 below.

Table 2:  New Low Income Tax Offset for Australian tax residents

Taxable Income ($)  Revised amount of the new LITO ($)
37,500 or less 700
37,501 to 45,000 700 less 5.0 per cent of excess over 37,500
45,001 to 66,667 325 less 1.5 per cent of excess over 45,000

Change to the personal income tax brackets

Under the already legislated Personal Income Tax Plan, gradual changes to the tax thresholds will occur to eventually remove the 37 per cent tax bracket and apply a 32.5 per cent tax rate to taxable income between $41,000 and $200,000 by 1 July 2024.

Additional tax threshold and marginal rate changes have now been announced, increasing the current top threshold of the 19 per cent tax bracket from $41,000 to $45,000 from 1 July 2022 and reducing the 32.5 per cent marginal tax rate to 30 per cent from 1 July 2024.

The following table summaries all of the relevant changes announced.

Table 3: Income tax rates for Australian tax residents 

Rate 
(%)
Current Thresholds (from 1 July 2018) Income range ($) Thresholds 
from 1 July 2022
Income range ($)
Thresholds 
from 1 July 2024
Income range ($)
Tax free 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

One-off Energy Assistance Payment

The Government will also make a one-off Energy Assistance Payment of $75 for singles and $62.50 for each member of a couple ($125 total) who are eligible for ‘qualifying payments’ as at 2 April 2019 and who are residents of Australia for tax purposes.

Qualifying payments include the Age Pension, Carer Payment, Disability Support Pension, Parenting Payment Single, the Veterans’ Service Pension and the Veterans’ Income Support Supplement, Veterans’ disability payments, War Widow(er)s Pension, and certain permanent impairment payments.

The payment will be exempt from income tax with first payments expected to be made automatically before 30 June 2019, subject to the passage of legislation.

Medicare levy

The Medicare levy low-income thresholds for singles, families and seniors and pensioners will increase from the 2018-19 income tax year as follows:

  • Individuals $22,398 (increased from $21,980)
  • Families $37,794 (increased from $37,089), with an additional $3,471 for each dependent child or student (increased from $3,406)
  • Single seniors and pensioners $35,418 (increased from $34,758), and
  • The family threshold for seniors and pensioners will be increased to $49,304 (increased from $48,385) plus $3,471 for each dependent child or student (increased from $3,406).

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Siraj Ahmed
Siraj Ahmed
2020-11-18
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Malaka Ekanayake
2020-11-10
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We have had a very pleasant experience working with Opulent Finance. We did not have that much experience with house loans as we were first home buyers but working with Opulent  Finance team specially with Ishara, made that experience stress free one. She helped us secure an incredibly competitive interest rate and offered her guidance so we can take advantage of the future interest rate drop. Thank you Ishara, Dayan and team for your incredible support and we have no hesitation what so ever in recommending Opulent Finance for your financial needs
Uma Gunaratne
Uma Gunaratne
2020-11-04
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Ishara is highly knowledgeable and if you are a first home buyer and new to the intricacies of all that home loans entail, she will really take you under her wing and impart her knowledge and experience and treat you as one of her own. She is also extremely patient but will also be very truthful and upfront in situations which is honestly what you need. She did a very complicated loan for us, and was so incredible efficient and organised with all the paperwork that was required. Not only that, she helped us secure an incredibly competitive interest rate! Ishara has probably spent hours and hours explaining to me details and giving me really good guidance through this momentous period in life! During the cooling off period and settlement, she was constantly chasing up our loan and honestly took a personal interest in the outcome. Our solicitor was also very happy about working with Ishara as she was following the entire process, was always up to date and very easy to work with. Considering that our entire process happened during the covid-19 lock-down and work from home environment, we have nothing but good things to say about how professional Ishara was as she didn't let a single thing slip. We are so glad that we have both Ishara and Dayan in our corner. We will definitely be using them for all future financing needs. Thank you Ishara, Dayan and team!
Harsha Ill
Harsha Ill
2020-10-11
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Opulent Finance gave professional advice for my unique home loan requirement. They respond quickly with the proper information. The process was smooth and I felt comfortable to deal with the team. The team is friendly and professional to deal with. Highly recommended for any one looking for finance.
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S P
2020-09-22
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I have been dealing with Ishara at Opulent Finance for over 6 months now and she has been faultless. She has helped me secure a loan pre-approval in no time and assisted me with my property purchases. I could not recommend Ishara highly enough.
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2020-09-22
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Good service and offers.
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2020-08-22
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A big shout out to Dayan and his team for the seamless service provided during the refinancing process. Thoroughly professional team that pays attention to every detail and has been extremely transparent throughout the process. A team that always has the best interest of clients in mind and makes all efforts to provide the right advise and outcomes to the clients. Highly recommended!
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2020-08-19
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