Changes to the individual tax rates have been proposed as part of a 3 phase package announced in the 2019 federal budget. The proposed changes to the tax rates would commence from 1 July 2022, but also include a proposal to change personal tax offsets for the 2018/19 income year.
Phase 1: Increasing personal tax offsets
The first phase of the income tax plan is to increase the low and middle income tax offset (LAMITO), beginning in the 2018/19 income year.
The LAMITO was legislated last year from a 2018 federal budget announcement, which offers a base offset of $200 for individuals earning less than $37,000. The offset then rises up to $530 for middle income earners between $48,000 and $90,000 and phases out at $126,000.
The proposal in the current tax plan will increase the base offset to $255 and increase the maximum offset to $1,080. The plan still proposes that individuals earning above $126,000 will receive no offset.
There is no change to the operation of LAMITO, in that it will run for 4 years from 2018/19 to 2021/22. Further information on the changes to the offset are included in this separate iQ event.
Phase 2: Future changes to the bracket
The second phase of the income tax plan proposes to change the top of the 19% tax bracket from $41,000 to $45,000 from 1 July 2022.
Also, as this date will mark the end of the LAMITO 4 year run, the base rate will be incorporated into the low income tax offset. Currently, the low income tax offset is due to increase from $445 to $645 from 1 July 2022 as per the 2018 legislated changes to personal income tax.
The proposal will be to change the offset from $645 to $700 to coincide with the $55 increase to the base rate of LAMITO.
Phase 3: Future changes to the tax rate
The third phase of the income tax plan proposed to move the 32.5% tax bracket down to 30% from 1 July 2024. The change in the tax rate will be at the same time the 37% tax bracket is due to be removed from the income tax rates.
Therefore, the proposal is to change the middle tax bracket from 1 July 2024 to be 30% income tax for incomes between $45,000 and $200,000.
Proposed tax brackets (tables)
| 2018/19 to 2021/22 income years | |||
| Minimum | Maximum | Tax on minimum | Tax rate on excess |
| – | 18,200 | – | 0.0% |
| 18,201 | 37,000 | – | 19.0% |
| 37,001 | 90,000 | 3,572 | 32.5% |
| 90,001 | 180,000 | 20,797 | 37.0% |
| 180,001 | and above | 54,097 | 45.0% |
| 2022/23 to 2023/24 income years | |||
| Minimum | Maximum | Tax on minimum | Tax rate on excess |
| – | 18,200 | – | 0.0% |
| 18,201 | 45,000 | – | 19.0% |
| 45,001 | 120,000 | 5,092 | 32.5% |
| 120,001 | 180,000 | 29,467 | 37.0% |
| 180,001 | and above | 51,667 | 45.0% |
| 2024/25 and future income years | |||
| Minimum | Maximum | Tax on minimum | Tax rate on excess |
| – | 18,200 | – | 0.0% |
| 18,201 | 45,000 | – | 19.0% |
| 45,001 | 200,000 | 5,092 | 30.0% |
| 200,001 | and above | 51,592 | 45.0% |