Q: I’ve read about the income tax changes announced in the Budget but they all seem to be happening in a few years. I have concerns about the tax return that I will be filing on 30 June and would like to know if there are any changes.
A: Yes, there are changes. One of the income thresholds for the marginal tax rates has changed for this tax year. For income earned in the year to 30 June 2018, the 32.5 per cent rate applied to taxable income between $37,001 and $87,000, and the 37 per cent rate applied to income between $87,001 and $180,000.
For income earned in the year to 30 June 2019, the 32.5 per cent rate applies to income between $37,001 and $90,000, and the 37 per cent rate applies to income between $90,001 and $180,000.
Treasurer Josh Frydenberg announced in the Budget that the Government is providing $158 billion in tax relief over the next decade following on from the last budget’s $144 billion three-stage tax cut scheme.
The first part of the tax plan will be immediate tax relief for low and middle-income earners with the low-to middle-income tax offset (LMITO) which has been introduced as a non-refundable tax offset for three years from 30 June 2019.
“This relief will flow quickly and be available to Australians after tax returns for the 2018-19 year are submitted in 13 weeks’ time,” Frydenberg says.
The LMITO will provide a tax reduction of up to $255 for people with incomes less than $37,000 and 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 biggest offset is for tax payers earning between $48,000 and $90,000. They will receive the maximum offset of $1,080 for singles and $2,160 for dual incomes families.
For taxable incomes between $90,000 to $126,000, the offset will phase out at a rate of 3 cents per dollar.
It is also important to take into consideration the slight increase in the Medicare levy for low-income thresholds. 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.