29 October 2019
by David Prichard
- Related topics
- Personal Tax
The main aspect of the Federal Budget were the changes announced to personal income tax bandings and rates albeit that some of these are phased in over a long period. The instant changes are focused on the Energy Assistance payments and the doubling of the low to middle income tax offset (LMITO).
Tax Rate and Banding Changes
The Federal Budget has announced what is, in essence, a structural change to the personal tax rate bandings and will, if implemented, be applicable to over 90% of taxpayers with effect from the 2024 income tax year.
The initial step of the proposed changes impacts the 32.5% threshold, which, from 1 July 2022, will be increased to $45,000 (from $41,000).
The second step of the proposed changes eliminates the 32.5% tax rate such that the tax rate for income levels between $45,000 and $200,000 would be capped at 30% (excluding Medicare). The removal of the 32.5% rate is to occur with effect from 1 July 2024.
2019/20 TAX RATES
A summary of the Tax rates and thresholds for 2019-20 onwards is as follows:
Income Tax Rates & Thresholds
2018-19 to 2021-22
2022-23 and 2023-24
|0%||$0 – $18,200||$0 – $18,200||0%||$0 – $18,200|
|19%||$18,201 – 37,000||$18,201 – 45,000||19%||$18,201 – $45,000|
|32.5%||$37,001 – 90,000||$45,001 – 120,000||30%||$45,001 – $200,000|
|37%||$90,001 – $180,000||$120,001 – $180,000||37%||N/A|
The above table excludes the Medicare Levy of 2%.
Low to Middle Income Tax Offset and Low Income Tax Offset
The Federal Budget has proposed a doubling of the LMITO taking the maximum offset from $530 to $1,080 per year expiring in 2022.
The increase whilst clearly needed by low to middle income tax payers has the added impact of seeking to negate Labor’s appeal to taxpayers in the similar tax brackets.
The Low Income Tax Offset (LITO) will effectively merge with the LMITO in 2022 and as part of this process the budget includes an increase in the LITO to $700 from 1 July 2022.
Energy Assistance Payments
In classic pre-election style the Federal Government have announced that singles and couples will receive $75 and $125 respectively. The one-off Energy Assistance payment will not, however, be available for everyone with pensions, people on the Disability Support Pension, veterans, carers and single parents those to benefit.
Main Residence Exemption – Non-Residents
There was no renewed announcement in the Federal Budget to revive the previously announced changes to the main residence exemption. The changes impacted non-residents and appears to be yet another announced change that has not been enacted and will, in all likelihood be condemned to history.
The legislation was scheduled to take full effect from 1 July 2019, however, the legislation is stuck in the Senate with little chance of progression due to technical flaws, the upcoming election and the Government prioritising other matters.
Should you require further information to the above or have any questions about how this may impact your situation, please do not hesitate to contact your engagement partner on 02 9283 1666.