Personal income tax
Changes to personal income tax rates
The Government has proposed the following changes to the personal income tax rates:
- From 1 July 2022, the Government will increase the upper threshold of the 19% personal income tax bracket to $45,000. The rates below do not include the Medicare Levy.
- The upper threshold of the 19% tax bracket was previously increased from $37,000 to $41,000, with effect from 1 July 2022 (i.e., 2023). In this latest Federal Budget, the Government has announced that this threshold will be increased from $41,000 to $45,000, with effect from 1 July 2022 (i.e., 2023).
- The upper threshold of the 32.5% tax bracket was previously increased from $90,000 to $120,000, with effect from 1 July 2022 (i.e., 2023).
- From the 2025 income year, the 32.5% marginal tax rate will be reduced to 30%. This is in addition to changes already legislated for 2025, to increase the upper threshold of the (now) 32.5% tax bracket from $120,000 to $200,000 and abolish the 37% tax bracket.
Immediate relief for low and middle-income earners
The Low and Middle Income Tax Offset (‘LMITO’) is a non-refundable tax offset that is intended to benefit Australian resident low and middle-income taxpayers. Currently, the LMITO applies from the 2019 income year to provide tax relief of up to $530, with a base amount of $200.
The Government has announced that it will increase the LMITO, with effect from the 2019 income year, to provide tax relief of up to $1,080 per annum, as well as an increased base amount of $255 per annum. The (increased) LMITO will be available for the 2019 income year up until the 2022 income year (inclusive) and will be received on assessment after individuals lodge their income tax return.
The current and proposed LMITO apply as follows:
The LMITO applies in addition to the Low Income Tax Offset (‘LITO’). The maximum LITO is currently $445.
From 1 July 2022, both the LMITO and LITO will be replaced by a single LITO. In the 2018/19 Federal Budget, the Government announced that the maximum single LITO will be $645.
In the 2019/20 Federal Budget, the Government has now announced that the maximum single LITO will be increased 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 The increased LITO will be withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000. LITO will then be withdrawn at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.
Increasing the Medicare levy low-income thresholds
The Government will increase the Medicare levy low-income thresholds for singles, families and seniors and pensioners from the 2019 income year, as follows:
- The threshold for singles will be increased from $21,980 to $22,398.
- The family threshold will be increased from $37,089 to $37,794.
- The threshold for single seniors and pensioners 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.
For each dependent child or student, the family income thresholds increase by a further $3,471, up from the previous amount of $3,406.
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