The Government has announced measures that seek to build on previously legislated changes to reduce personal income tax over the next six years.
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Low and middle income tax offset (LMITO)
With immediate effect for the 2019 income year, the Government has proposed to increase the non-refundable low- and middle-income tax offset (LMITO) to a maximum amount of $1,080 (up from $530) for taxpayers earning more than $48,000 but no more than $90,000. The LMITO then phases out from $90,001 to $126,000. The base amount of the LMITO is also proposed to increase from $200 to $255 for those earning no more than $48,000. This offset is in addition to the existing low-income tax offset (LITO) and is a temporary measure due to be removed on 30 June 2022.
Tax rate changes
With effect from 1 July 2022, the Government proposes to increase the top threshold of the 19% tax bracket from the previously legislated $41,000 to $45,000 and will also increase the LITO from the previously legislated amount of $645 to $700. These changes are intended to lock in the reduction in tax provided by the LMITO, once the LMITO is removed.
The Government has already legislated to remove the 37% tax bracket with effect from 1 July 2024. In this Budget, it announced a further change to reduce the 32.5% marginal tax rate to 30%, which will take effect at the same time. This means that taxpayers earning up to $200,000 will pay a maximum marginal tax rate of 30% from the 2025 income year. For that year, taxpayers will be able to earn fully franked dividends of approximately $158,000 without paying any top-up tax (assuming a franking rate of 30%) and approximately $90,000 (assuming a franking rate of 25%).
Tax rates and thresholds for 2018-19 onwards
The table below summarises the announced personal tax rate and threshold changes (excluding the 2% Medicare levy).
| Tax rates and thresholds | |||
| Rate | 2018-19 | 2022-23 | 2024-25 |
| 0% | $0 – $18,200 | $0 – $18,200 | $0 – $18,200 |
| 19% | $18,201 – $37,000 | $18,201 – $45,000 | $18,201 – $45,000 |
| 30% | N/A | N/A | $45,001 – $200,000 |
| 32.5% | $37,001 – $90,000 | $45,001 – $120,000 | N/A |
| 37% | $90,001 – $180,000 | $120,001 – $180,000 | N/A |
| 45% | $180,001+ | $180,001+ | $200,001+ |
| LITO | Up to $445 | Up to $700 | Up to $700 |
| LMITO | Up to $1,080 | ||
Medicare levy low-income thresholds for 2018-19
For the 2018-19 income year, the Medicare levy low-income threshold for singles will be increased to $22,398 (up from $21,980 in 2017-18). For couples with no children, the family income threshold will be increased to $37,794 (up from $37,089 in 2017-18). For each dependent child or student, the family income threshold will increase by $3,471 (up from $3,406 in 2017-18).
For single seniors and pensioners eligible for the seniors & pensioners tax offset, the Medicare levy low-income threshold will be increased to $35,418 (up from $34,758 in 2017-18). The family threshold for seniors and pensioners will be increased to $49,304 (up from $48,385), plus $3,471 for each dependent child or student.
