The tax office has moved to avert an administrative nightmare for tax payers who have already lodged their tax returns and risked missing out on the new tax offsets.
The ATO released a statement on Friday saying it was implementing system changes so taxpayers who have already lodged their 2018/19 return will receive any increase to the low and middle income tax offset they are entitled to. Any tax refund will be deposited in the taxpayer’s nominated bank account.
The ATO says refunds for returns already lodged are expected to start going out towards the end of the week.
“Those who are yet to lodge their return will have any offset they are entitled to taken into account during the normal processing of their return,” the ATO says.
Treasurer Josh Frydenberg says: “The tax office will update their records and send them the cheque. And for those who are going to put in their tax return, I would encourage them to do that as early as possible because over 10 million Australians will receive up to $1,080 and that will be of great use to them and will also be of great help to the Australian economy.”
The Morrison Government passed its $154 billion tax cut package through the Senate late last week, which will provide relief to millions of low and middle-income Australians.
There will be immediate tax cuts for low and middle-income earners with the low to middle income tax offset (LMITO) of up to $1080 for single earners and up to $2160 for dual income families for Australians earning between $48,000 and $90,000 for the next four years.
The value of the LMITO increases at a rate of 7.5 cents per dollar for taxable incomes between $37,000 and $48,000, to the maximum offset of $1,080.
The LMITO will provide a tax reduction of up to $255 for people with incomes less than $37,000 and for those earning between $90,000 to $126,000, the offset will phase out at a rate of 3 cents per dollar.
Tax partner at HLB Mann Judd Sydney Peter Bembrick, says: “It’s a well targeted approach with tax offset relief to the lower ends and there is quite a bit of relief for middle income earners as well.”
In other parts of the tax package, from 2022/23 the Government will increase the top threshold of the 19 per cent tax bracket from $41,000 to $45,000 and the low-income tax offset will extend to $700 from $645.
The bill implements further changes in the coming years. From 1 July 2024, the tax bracket will expand to include those earning between $45,000 and $200,000 with a drop of 2.5 per cent in the marginal tax rate to 30 per cent.
The change to the top threshold will prevent around 590,000 taxpayers from entering a higher tax bracket.
From 2024 the 37 per cent tax bracket will be abolished and the top marginal rate of 45 per cent will apply to taxable incomes above $200,000.
The budget papers show that by 2024/25 around 60 per cent of all personal income tax will be paid by the highest earning 20 per cent of taxpayers.
“There is an immediate impact but there will be a delayed economic impact. We hear a lot of negative stories about the economy and the housing market, so we wonder what consumer confidence is like and we will have to wait and see how much of a difference this will make,” Bembrick says.
The current Medicare Levy Surcharge for 2018/19 is an additional tax between 1 and 1.5 per cent. The Government announced a slight increase in the income threshold bracket for the levy.
Singles can now earn $22,389 which is up from $21,980 and the threshold for families is $37,794 from $37,089. The family threshold for seniors and pensioners will be increased to $49,304 from $48,385. For each dependent child or student, the family income thresholds increase by a further $3,471 which is a $65 increase.