It’s been a tough year for the Government, business and individuals and it’s not expected to get much better any time soon. Wages are forecast to grow by just 1.25% this financial year and 1.5% next financial year, before hitting 2% in 2022-23.
To boost the economy, the Government has announced that it will bring forward tax cuts that were originally scheduled for the middle of 2022. These tax cuts will be backdated to July 1 2020, and adjustments will be made to tax payments through to the end of the financial year to ensure the benefits are in people’s pockets straight away.
In the 2020 budget, the Government announced:
- The low-income tax offset will provide up to an additional $255 in tax relief as it increases from $445 to $700.
- The top threshold of the 19% bracket will increase from $37,000 to $45,000, providing up to $1,080 in tax relief.
- The top threshold of the 32.5% bracket will increase from $90,000 to $120,000 preventing individuals from facing higher marginal tax rates in the future and providing tax relief of up to $1,350.
Here’s how it pans out:
If you’re earning between $45,000 and $90,000, you’ll pay 19 cents or less for every dollar earned up to $45,000, then 32.5 cents on every dollar earned between $45,000 and $120,000.
The low and middle-income tax offset (LMITO) of about $1,080, which was meant to end when stage two of the Government’s tax cuts came into force, will remain for the 2020-21 financial year. However, this will revert in 2021-22, which means you’ll pay more tax next year than you do this year.
If you’re earning over $120,000, you’ll get a permanent tax cut of around $2,430.
It’s understood that legislated stage 3 tax cuts will remain on the original 2024 time frame and not be fast-tracked. At that time, the 37% tax bracket will be abolished, and the 32.5 % marginal tax rate reduced to 30%. As a result, around 95% of taxpayers will face a marginal tax rate of 30% or less in 2024–25.
The Ayers Group Can Help
Navigating your way through tax changes can be difficult. At the Ayers Group, we can help you manage your administrative obligations and connect you with tax advisors and financial experts to help you grow your wealth. Talk to the Ayers Group today.
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