The Government has announced measures that seek to build on previously legislated changes to reduce personal income tax over the next six years.
Low and middle income tax offset (LMITO)
With immediate effect for the 2019 income year, the Government has proposed to increase the non-refundable low- and middle-income tax offset (LMITO) to a maximum amount of $1,080 (up from $530) for taxpayers earning more than $48,000 but no more than $90,000. The LMITO then phases out from $90,001 to $126,000. The base amount of the LMITO is also proposed to increase from $200 to $255 for those earning no more than $48,000. This offset is in addition to the existing low-income tax offset (LITO) and is a temporary measure due to be removed on 30 June 2022.
Tax rate changes
With effect from 1 July 2022, the Government proposes to increase the top threshold of the 19% tax bracket from the previously legislated $41,000 to $45,000 and will also increase the LITO from the previously legislated amount of $645 to $700. These changes are intended to lock in the reduction in tax provided by the LMITO, once the LMITO is removed.
The Government has already legislated to remove the 37% tax bracket with effect from 1 July 2024. In this Budget, it announced a further change to reduce the 32.5% marginal tax rate to 30%, which will take effect at the same time. This means that taxpayers earning up to $200,000 will pay a maximum marginal tax rate of 30% from the 2025 income year. For that year, taxpayers will be able to earn fully franked dividends of approximately $158,000 without paying any top-up tax (assuming a franking rate of 30%) and approximately $90,000 (assuming a franking rate of 25%).
Tax rates and thresholds for 2018-19 onwards
The table below summarises the announced personal tax rate and threshold changes (excluding the 2% Medicare levy).
|Tax rates and thresholds|
|0%||$0 – $18,200||$0 – $18,200||$0 – $18,200|
|19%||$18,201 – $37,000||$18,201 – $45,000||$18,201 – $45,000|
|30%||N/A||N/A||$45,001 – $200,000|
|32.5%||$37,001 – $90,000||$45,001 – $120,000||N/A|
|37%||$90,001 – $180,000||$120,001 – $180,000||N/A|
|LITO||Up to $445||Up to $700||Up to $700|
|LMITO||Up to $1,080|
Medicare levy low-income thresholds for 2018-19
For the 2018-19 income year, the Medicare levy low-income threshold for singles will be increased to $22,398 (up from $21,980 in 2017-18). For couples with no children, the family income threshold will be increased to $37,794 (up from $37,089 in 2017-18). For each dependent child or student, the family income threshold will increase by $3,471 (up from $3,406 in 2017-18).
For single seniors and pensioners eligible for the seniors & pensioners tax offset, the Medicare levy low-income threshold will be increased to $35,418 (up from $34,758 in 2017-18). The family threshold for seniors and pensioners will be increased to $49,304 (up from $48,385), plus $3,471 for each dependent child or student.