15 July 2019
The Federal Government’s Personal Income Tax Plan has now become law, delivering tax relief for millions of Australians.
The plan has three phases
Phase one is the Low and Middle Income Tax Offset (LMITO)
- Increase the LMITO from a maximum amount of $530 to $1,080 per annum and increase the base amount from $200 to $255 per annum
- Taxpayers with a taxable income which does not exceed $37,000 will receive a low and middle income tax offset of up to $255
- Taxpayers with a taxable income which exceeds $37,000 but is not more than $48,000 will receive $255, plus an amount equal to 7.5 per cent to the maximum offset of $1,080
- Taxpayers with a taxable income which exceeds $48,000 but is not more than $90,000 will be eligible for the maximum low and middle income tax offset of $1,080
- Taxpayers with a taxable income which exceeds $90,000 but is not more than $126,000 will be eligible for a low and middle income tax offset of $1,080, less an amount equal to 3 per cent of the excess.
The tax offset is being applied to the 2018-2019 income year and will also be available in the 2019-20, 2020-21 and 2021-22 income years.
The tax offset is available now.
If you’re eligible for the offset, it will be automatically processed by the ATO when you lodge your tax return.
Phase two will see the 19% personal income tax bracket increased from $41,000 to $45,000
This will change the tax rates as follows:
- 19 per cent tax rate for those earning above $18,200 but not more than $45,000
- 32.5 per cent tax rate for those earning above $45,000 but not more than $120,000
- 37 per cent tax rate for those earning above $120,000 but not more than $180,000
- 45 per cent tax rate for those earning above $180,000
Additionally, the Low Income Tax Offset (LITO – not to be confused with the LMITO) will be increased from a maximum of $645 to $700 for those earning $37,500 or less, and will be applied as follows:
- Those who earn $37,500 or less will receive a LITO of $700
- Those who earn above $37,500 but not more than $45,000 will receive a LITO of $700, less an amount equal to 5 per cent of the excess
- Those who earn above $45,000 but not more than $66,667 will receive a LITO of $325, less an amount equal to 1.5 per cent of the excess.
Phase Two will take effect in the 2022-2023 income year.
Phase three will see the 32.5% marginal tax rate reduced to 30% for a resident individual
Impacting the tax rates as follows:
- 19 per cent tax rate for those earning above $18,200 but not more than $45,000
- 30 per cent tax rate for those earning above $45,000 but not more than $200,000
- 45 per cent tax rate for those earning above $200,000
Phase three will take effect in the 2024-2025 income year.
Contact the team at Shakespeare on 08 9321 2111 if you’d like to discuss how this may apply to your individual circumstances.
Australian Taxation Office “Low and middle income earners” July 2019
General disclaimer: Our firm provides the information on this website for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles on this website are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose
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