Federal Budget 2018: Tax (individuals)
This article is published by Modoras Accounting (VIC) Pty Ltd ACN 145 368 850
Federal Budget 2018 Initiatives: Tax (individuals)
- The Personal Income Tax Thresholds
- Low and Middle Income Tax Offset
- Medicare Levy Retained
- Increase to the Medicare Levy Threshold for Low Income Earners
The Personal Income Tax Thresholds
Effective 1 July 2018
Over a seven year period commencing in the 2018-19 financial year, the Government will introduce a 3-phase personal income tax plan that will see the income threshold of the 32.5% marginal tax rate progressively increase to $200,000 by 1 July 2024. Which will eventually abolish the 37% tax bracket from 1 July 2024. At the end of the 7 year period, the tax thresholds will be simplified to four brackets, resulting in the majority of taxpayers being on a marginal tax rate of 32.5 per cent or less.
Low and middle income earners will benefit from tax savings of up to $530 per person (or $1,060 per couple), via a 3-phase personal income tax plan over a seven year period.
The table below outlines the Government’s personal income tax threshold transition plan:
Low and Middle Income Tax Offset
A new non-refundable Low and Middle Income Tax Offset (LMITO) will be introduced. The LMITO will be a temporary measure applying from 2018-19 and phasing out in the 2021-22 financial year. The maximum annual offset will be $530 and will cut out for those with a taxable income above $125,333 per annum.
The table below illustrates the impact of the changes to the tax thresholds during the transition phase. Outlining the tax payable in future financial years (and the potential tax savings compared to 2017/18) for a range of taxable incomes. The calculations take into account the proposed personal income threshold and LMITO changes.
Medicare Levy Retained
The proposed Medicare levy increase to 2.5 per cent of taxable income from 1 July 2019 will no longer proceed. The existing 2.0% Medicare Levy will be retained.
Increase to the Medicare Levy Threshold for Low-Income Earners
The Medicare levy thresholds for low income earners will be increased in the 2017-18 financial year. The threshold for singles will increase to $21,980 per annum and, for families with no children, to $37,089 per annum.
For those individuals and couples who are eligible for seniors and pensioners tax offset (SAPTO) the thresholds will increase to $34,758 per annum and $48,385 per annum respectively.
The additional threshold amount for each dependent child or student will increase to $3,406 per annum.
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