Federal Budget 2019 – changes for individuals
Thank you to our guest blog, Tax & Super Australia.
The Treasurer Josh Frydenberg’s first budget, released on 2 April, 2019 was generally a little ‘light on’ in the context of Federal Budgets. However, there were some points to worth drilling into that will impact individuals.
Individual tax relief via increased LMITO
The previously proposed (and legislated) low and middle income tax offset (LMITO) will now be increased from a maximum amount of $530 to $1,080 a year for singles and the base amount will increase from $200 to $255 a year for the 2018-19, 2019-20, 2020-21 and 2021-22 income years.
As a result, the LMITO will now provide a reduction in tax of up to $255 for taxpayers with a taxable income of $37,000 or less. For taxable incomes between $37,000 and $48,000, the value of the offset will increase at a rate of 7.5 cents per dollar to the maximum offset of $1,080.
As a result, taxpayers with taxable incomes between $48,000 and $90,000 will be eligible for the maximum offset of $1,080. For taxable incomes between $90,000 to $126,000 the offset will phase out at a rate of 3 cents per dollar.
The LMITO will be received on assessment after individuals lodge their tax returns for the relevant income years.
Future changes in tax thresholds and rates
Reductions in individual thresholds and/or marginal tax rates will apply in future income years. From 1 July 2022, the top threshold of the 19% personal income tax bracket will be increased from the previously legislated $41,000 to $45,000.
From 1 July 2022, the government will increase the low income tax offset (LITO) from $645 to $700. The increased LITO will be withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000, instead of at 6.5 cents per dollar between taxable incomes of $37,000 and $41,000 (as previously legislated).
LITO will then be withdrawn at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667. (Note that following these changes the proposed LMITO relief will be removed.)
From 1 July 2024-25, the 32.5% marginal tax rate will be reduced to 30%. Further, in 2024-25 the entire 37% tax bracket will be abolished. As a result of these proposed changes, the government states that by 2024-25 around 94% of Australian taxpayers are projected to face a marginal tax rate of 30% or less.
Rates and thresholds under the Government’s enhanced Personal Income Tax Plan
Medicare levy low-income threshold increased
The Medicare levy low-income thresholds for singles and families, as well as seniors and pensioners, has been increased from the 2018-19 income year as follows:
- for singles, the threshold will be increased from $21,980 to $22,398
- for families, the threshold will be increased from $37,089 to $37,794
- for single seniors and pensioners, the threshold will be increased from $34,758 to $35,418
- the family threshold for seniors and pensioners will be increased from $48,385 to $49,304
Note also that for each dependent child or student, the family income thresholds increase by a further $3,471, instead of the previous amount of $3,406.
To find out more about the Federal Budget, visit our articles on each of these topics: