The Government will maintain changes to reduce personal income tax. This measure is designed to continue to stimulate the economy by increasing the disposable income available to individuals.
Key take-aways
- Low and middle income tax offset (LMITO) and low income tax offset (LITO) will continue to apply for the 2021-22 income year.
- No changes to the personal income tax rates for the 2021-22income year.
- Medicare levy low income threshold will increase to $23,226 for singles, $39,167 for couples with no children, and $3,597 for each dependent child or student.
Income tax offset
The Treasurer confirmed that the low and middle income tax offset (LMITO) will be retained for the 2021–22 income year. It provides a reduction in tax of up to $255 for taxpayers with a taxable income of $37,000 or less. The LMITO will increase at a rate of 7.5 cents for every dollar of taxable income between $37,000 and $48,000, and taxpayers with taxable incomes between $48,000 and $90,000 will receive the full $1,080. For taxpayers with a taxable income over $90,000, the LMITO will phase out at a rate of 3 cents for every additional dollar of taxable income. It will phase out completely at a taxable income of $126,000.
The low income tax offset (LITO) will also continue to apply for the 2021–22 income year. For taxpayers with taxable incomes of less than $37,500, the offset is $700. The offset then reduces at a rate of 5 cents for each dollar of taxable income to $45,000 and at a rate of 1.5 cents for each subsequent dollar of taxable income, completely phasing out for taxable incomes above $66,668.
Personal tax rates
There have been no changes to the personal income tax rates for the 2021-22 income year. Stage 3 of the Government’s personal income tax plan remains unchanged and should commence from 1 July 2024.
The table below summarises the resident personal tax rate and thresholds (excluding the 2% Medicare levy).
Rate |
Tax payable |
2021–22 Announced in 2020-21 Budget |
2024–25 Previously announced |
|---|---|---|---|
0% |
Nil |
$0 – $18,200 |
$0 – $18,200 |
19% |
Nil |
$18,201 – $45,000 |
$18,201 – $45,000 |
30% |
N/A |
N/A |
$45,001 – $200,000 |
32.5% |
5,092 |
$45,001 – $120,000 |
N/A |
37% |
29,467 |
$120,001 – $180,000 |
N/A |
45% |
51,667 |
$180,001+ |
$200,001+ |
Medicare levy low-income thresholds
For the 2020-21 income year, the Medicare levy low income threshold for singles will be increased to $23,226 (up from $22,801). For couples with no children, the family income threshold will be increased to $39,167 (up from $38,474). For each dependent child or student, the family income threshold will increase by $3,597 (up from $3,533).
For single seniors and pensioners eligible for the seniors and pensioners tax offset, the Medicare levy low income threshold will be increased to $36,705 (up from $36,056). The family threshold for seniors and pensioners will be increased to $51,094 (up from $50,191).
Simplifying deductions for self-education expenses
Currently, individuals undertaking a prescribed course of education are only entitled to deduct the excess of the expenses incurred over $250. This exclusion of the first $250 of eligible self-education expenses is to be removed. This measure will take effect from the first income year after the date the amending legislation receives Royal Assent.
