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Future income tax cuts for individuals

Future income tax cuts for individuals

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
MinimumMaximumTax on minimumTax rate on excess
18,2000.0%
18,20137,00019.0%
37,00190,0003,57232.5%
90,001180,00020,79737.0%
180,001and above54,09745.0%

 

2022/23 to 2023/24 income years
MinimumMaximumTax on minimumTax rate on excess
18,2000.0%
18,20145,00019.0%
45,001120,0005,09232.5%
120,001180,00029,46737.0%
180,001and above51,66745.0%

 

2024/25 and future income years
MinimumMaximumTax on minimumTax rate on excess
18,2000.0%
18,20145,00019.0%
45,001200,0005,09230.0%
200,001and above51,59245.0%

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