Parliament has passed the Government’s Personal Income Tax plan, meaning that the first stage of the proposed income tax cuts start to take effect from 1 July 2018.
According to the Prime Minister, taxes “will now be lower, fairer and simpler”.
The Government’s plan has three steps:
- The Government will introduce the Low and Middle Income Tax Offset (in addition to the Low Income Tax Offset) from 1 July 2018, being a non-refundable tax offset of up to $530 per annum to Australian resident low and middle income taxpayers (apparently over 10 million taxpayers will get at least some tax relief from this new offset in 2019 income year).
The offset will be available for the 2019, 2020, 2021 and 2022 income years and will be received as a lump sum on assessment after an individual lodges their tax return.
- Lifting tax brackets, to protect Australians from the impact of ‘bracket creep’, as follows:
– From 1 July 2018, the top threshold of the 32.5% personal income tax rates bracket will increase from $87,000 to $90,000.
- From 1 July 2022, the 19% personal income tax bracket will increase from $37,000 to $41,000, and the top threshold of the 32.5% personal income tax bracket will further increase from $90,000 to $120,000.
The low income tax offset will also be lifted to $645.
- The 37% tax bracket will be removed entirely from 1 July 2024, and the top threshold of the 32.5% personal income tax bracket will be increased from $120,000 to $200,000.
Don’t forget to check that you are withholding the correct tax from your employees’ wages. If you are using cloud accounting software, these would be updated automatically.
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