INDIVIDUAL TAX RELIEF VIA INCREASED LMITO

The previously proposed (and legislated) low and middle income tax offset (LMITO) will now be increased from a maximum amount of $530 to $1,080 a year for singles and the base amount will increase from $200 to $255 a year for the 2018-19, 2019-20, 2020-21 and 2021-22 income years.

As a result, the LMITO will now provide a reduction in tax of up to $255 for taxpayers with a taxable income of $37,000 or less. For taxable incomes between $37,000 and $48,000, the value of the offset will increase at a rate of 7.5 cents per dollar to the maximum offset of $1,080. As a result, taxpayers with taxable incomes between $48,000 and $90,000 will be eligible for the maximum offset of $1,080. For taxable incomes between $90,000 to $126,000 the offset will phase out at a rate of 3 cents per dollar.

The LMITO will be received on assessment after individuals lodge their tax returns for the relevant  income years. 

Who will it affect?
All individuals taxpayers

When will it apply?
The 2018-19 to 2021-22 income years (inclusive) 

Comment:

From 1 July 2018, individual tax relief or tax reduction will be effected by an increase in the LMITO (which was previously introduced and legislated following the 2018-19 Budget) and not by the anticipated changes in tax thresholds and/or marginal tax rates.

FUTURE CHANGES IN TAX THRESHOLDS AND RATES

Reductions in individual thresholds and/or marginal tax rates will apply in future income years as follows: 

From 1 July 2022, the top threshold of the 19% personal income tax bracket will be increased from the previously legislated $41,000 to $45,000.

From 1 July 2022, the Government will increase the low income tax offset (LITO) from $645 to $700. The increased LITO will be withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000, instead of at 6.5 cents per dollar between taxable incomes of $37,000 and $41,000 (as previously legislated). LITO will then be withdrawn at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667. (Note that following these changes the proposed LMITO relief will be removed.)

From 1 July 2024-25, the 32.5% marginal tax rate will be reduced to 30%. Further, in 2024-25 the entire 37% tax bracket will be abolished.

Who will it affect?
All individuals taxpayers

When will it apply?
The 2022-23 to 2024-25 income years (inclusive)

Comment:

As a result of these proposed changes, the government states that by 2024-25 around 94% of Australian taxpayers are projected to face a marginal tax rate of 30% or less. 

MEDICARE LEVY LOW-INCOME THRESHOLDS INCREASED

What is the proposed measure?

The Medicare levy low-income thresholds for singles and families, as well as seniors and pensioners, has been increased from the 2018-19 income year as follows: 
• for singles, the threshold will be increased from $21,980 to $22,398; 
• for families, the threshold will be increased from $37,089 to $37,794; 
• for single seniors and pensioners, the threshold will be increased from $34,758 to $35,418;
• the family threshold for seniors and pensioners will be increased from $48,385 to $49,304.

Note also that for each dependent child or student, the family income thresholds increase by a further $3,471, instead of the previous amount of $3,406.

Who will it affect?

Singles, families, and seniors and pensioners

When will it apply?

From the 2018-19 income year