Personal income tax cuts now law

About the author:

Terri Bradford
Author name:
By Terri Bradford
Job title:
National Manager Wealth Management
Date posted:
08 July 2019, 1:15 PM

During their 2019 Federal Election campaign, Scott Morrison and his Government promised the people of Australia they would deliver on their proposed tax reforms from the 2019 Federal Budget. And they did just that last week.

A recap of the taxation measures

  • From 2018-19fy the Low to Middle Income Tax Offset (LMITO) of $530 for low and middle-income earners will double. For singles, this means up to $1,080 per annum and for families it means up to $2,160 per annum. This immediate tax relief will be available after 2018/19 tax returns are submitted from 1 July 2019.
  • From 2022-23 the 19% tax threshold will increase to $45,000; and the 32.5% will increase to $120,000 (the latter as already legislated).
  • From 2022-23 the Low-Income Tax Offset, which was scheduled to increase to $645, will now increase to $700.
  • The 32.5% tax rate will reduce to 30% in 2024-25 fy.

Current – 2019/20 Marginal Tax Rates

Income range Tax rates
Up to $18,200 0%
$18,201 - $37,000
$0 + 19% over $18,200
$37,001 - $90,000 $3,572 + 32.5% over $37,000
$90,001 - $180,000 $20,797 + 37% over $90,000
$180,001 $54,097 + 45% over $180,000

 

Legislated – 2022/23 Marginal Tax Rates

Income range Tax rates
Up to $18,200 0%
$18,201 - $45,000
$0 + 19% over $18,200
$45,001 - $120,000 $5,092 + 32.5% over $45,000
$121,001 - $180,000 $29,467 + 37% over $120,000
$180,001 $51,667 + 45% over $180,000

 

Legislated – 2024/25 Marginal Tax Rates

Income range Tax rates
Up to $18,200 0%
$18,201 - $45,000
$0 + 19% over $18,200
$45,001 - $200,000 $5,092 + 30% over $45,000
$200,001 $51,592 + 45% over $200,000

 

More Australians will face lower rates of tax

Share of personal tax paid
(Source: Budget Papers, 2019)

Australia's top marginal tax rate cuts in at around 2.2 times average full-time earnings, compared with 4 times in Canada and the UK, and 8 times in the US. Without the changes announced in last year’s Budget, Australia’s ratio was projected to drop to around 1.7, reducing our international competitiveness and ability to attract and retain talent.

Increasing the bottom threshold of the top tax bracket from $180,000 to $200,000 as legislated means that this ratio is now expected to fall more modestly to around 1.9. (Source: ‘Remaining internationally competitive’, 2019 Federal Budget Papers)

More information

You can access more analysis by clicking on 'Wealth Management' in the popular topics list. Alternatively, contact your Morgans adviser or nearest Morgans branch.

Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents ("Morgans") do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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