Happy Financial Year to All. Now that we are into the 2018/19 financial year, this means that the recent approval from the Senate of the seven-year personal Income Tax Plan comes into effect, and you may find yourself with some loose change in your pocket! The first step of this plan is to provide small tax relief to low and middle-income earners.
This will see a tax offset of up to $530 to low and middle-income earners which earn up to $90,000. This offset will be available upon lodging your tax return.
We will also see an uplift to the 32.5% ceiling from $87,000 to $90,000 as outlined below:Anyone earning over $90,000 per annum will be eligible for a tax saving of $135 for the year due to this change.
The 2nd step in the tax plan is to expand the tax relief to middle-income earners. From 1st July, 2022 the top threshold of the 32.5% tax bracket will be increased from $90,000 to $120,000 providing a tax cut of up to $1,350 per year.
The 3rd step being to simplify the tax system. From the 1st of July, 2024 the Government will increase the top threshold of 32.5% bracket from $120,000 to $200,000 and hence abolishing the 37% tax bracket. This will be a tax saving of $2,025 for a single household income of $120,000.
The Government have released figures showing that out of every 20 taxpayers there are 4 taxpayers in the 37% tax bracket v’s 10 taxpayers in the 32.5% tax bracket. The Government projects in seven years that with the abolishing of the 37% tax bracket they will see majority of taxpayers around 15 out of 20 in the 32.5% tax bracket.
This plan ensures that the minority are not taking the majority of the tax burden and encourages the tax system to not act as a drag on growth and aspiration.
Frances Easton CFP, M.FinPlan, B.Bus Acc, is a representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.
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