If you’re a taxpayer, you will be paying less tax from July.
The federal government has committed to shifting tax cuts that were legislated half a decade ago to provide more benefits to low- and middle-income workers. It breaks an election promise not to touch the stage 3 tax cuts, and it will mean the highest income earners will get half the benefit they were due to receive.
But every worker will see a little bump to their pay slips from July 1.
High-income earners will take a $4546 haircut on tax cuts Australians were told had been locked in, but middle-income earners will be up to $804 better off under Labor’s plan to change marginal tax rates.
The amendments to the planned tax cuts due to come into effect on July 1 include foregoing some of the planned tax cuts for workers earning $135,000 to $200,000 a year, and lowering the bottom marginal tax rate from 19 per cent to 16 per cent.
Analysis of the proposed changes to the stage three tax cuts by The Tax Institute finds that workers earning $200,000 and above will now receive a tax cut of $4529, rather than $9075.
Workers earning $130,000 will receive a tax cut of $3379, a $804 improvement on the $2575 cut they were originally in line to receive. Workers on $40,000, who were originally slated to get no tax cut, will receive a $654 benefit
When do the stage three tax cuts start?
The cuts are due to come into effect at the start of the next financial year, July 1.It’s worth noting this is different to some of the tax changes in recent years.
Unlike the fondly remembered “LMITO” tax offset that returned up to $1,080 at tax time, this won’t be a lump sum that’s given back to you when you do your taxes. Instead, from July 1 you’ll have slightly less tax taken out of your regular pay (hint: you can divide the number above by 26 to get a rough idea of how much more you’ll receive each fortnight).
The caveat is that the federal government will have to pass its new tax reforms through parliament, and needs the support of the Greens and some of the crossbench to do so. As long as that happens, the changes should automatically be reflected in your pay.
What are the new stage 3 tax cut brackets?
Here’s how the proposed plan looks at a glance:
Earn up to $18,200 – pay no tax
Pay a 16 per cent tax rate on each dollar earned between $18,201-$45,000
Pay a 30 per cent tax rate on each dollar earned between $45,001-$135,000
Pay a 37 per cent tax rate on each dollar earned between $135,001 — $190,000
Pay a 45 per cent tax rate on each dollar earned above $190,000
What were they going to be?
Here’s what the previous plan looked like at a glance:
Earn up to $18,200 – pay no tax
Pay a 19 per cent tax rate on each dollar earned between $18,201-$45,000
Pay a 30 per cent tax rate on each dollar earned between $45,001-$200,000
Pay a 45 per cent tax rate on each dollar earned above $200,000
How can we help?
If you have any questions or would like further information or you are seeking property tax advice, please feel free to contact our office via email –info@investplusaccounting.com.au or phone 02 9299 7000 to either speak with someone or arrange a time for a meeting so we can discuss your requirements in more detail.
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