How will your personal income tax be affected by the new tax measures?
In order to deal with the $90bil blow-out in the cash balance from the budget estimates prior to COVID-19, tax measures have been introduced into Parliament. You can find them in the Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020.
One of these measures is the personal income tax cuts, in which close to $30bil will be made available to 11 million taxpayers.
Stage 2 of the Personal Income Tax Plan was set to apply from 1 July 2022, but has been moved forward tw
o years to 1 July 2020. But what does this mean to the average taxpayer?
Basically this: The upper threshold of the 19% tax bracket will increase to $45 000 (from $37 000), and the upper threshold of the 32.5% tax bracket will increase to $120 000 (from $90 000).
Low- to middle-income earners will also receive additional support in the low income tax offset (LITO) through an increase from $445 to $700, and access to the low and middle income tax offset (LMITO) for 2020 - 2021.
The ATO announced that the PAYG withholding tables will reflect the personal tax cuts for 2020 - 2021. However, under- and over-payments of tax is expected to result from the mid-stream change in the income thresholds. Lodgement of the 2020 - 2021 tax return is expected to balance this issue out.