Date of effect: 1 July 2020
As widely predicted, the Government has brought forward stage 2 of its planned income tax cuts by two years. Originally intended to apply from 1 July 2022, the tax cuts will come into effect from 1 July 2020 (subject to the passage of the legislation). At a cost of $17.8 billion over the forward estimates, bringing forward the tax cuts is a controversial move. The Government argues that the measure will “boost GDP by around $3.5 billion in 2020-21 and $9 billion in 2021-22 and will create an additional 50,000 jobs by the end of 2021-22.” Others in Parliament believe the measure rewards higher income earners and the money could be better spent elsewhere. The Senate will decide whether the Government’s plan comes to fruition. Stage 3 of the Personal Income Tax Plan that simplifies and flattens the personal income system remains scheduled for 2024-25.
“More than 11 million taxpayers will get a tax cut backdated to 1 July this year”
– Josh Frydenberg
| Tax Rate | Current | From 1 July 2020 | From 1 July 2020 |
| 0% | $0 – $18,200 | $0 – $18,200 | $0 – $18,200 |
| 19% | $18,201 – $37,000 | $18,201 – $45,000 | $18,201 – $45,000 |
| 30% | $45,001 – $200,000 | ||
| 32.5% | $37,000 – $90,000 | $45,001 – $120,000 | |
| 37% | $90,001 – $180,000 | $120,001 – $180,000 | |
| 45% | $180,001 and over | $180,001 and over | $200,001 and over |
| LITO | Up to $445 | Up to $700 | Up to $700 |
Bringing forward the personal income tax plan will:
• Increase the top threshold of the 19% tax bracket to $45,000 (from $37,000)
• Increase the top threshold of the 32.5% tax bracket to $120,000 (from $90,000)
• Increase the low-income tax offset from $445 to $700
In addition, the LMITO (low and middle income tax offset), which provides a reduction in tax of up to $1,080 for individuals with a taxable income of up to $126,000, will be retained for 2020-21. This measure was to be removed at the commencement of stage 2 of the reforms from 2022-23.
Please touch base with our office on (02) 4323 1170 or [email protected] with any questions.