The item that may receive the most analysis from the whole of this year’s federal budget will be the increase of the 32.5% tax bracket, and an expansion of the Low Income Tax Offset. When it s time to do your taxes make sure you get tax preparation consulting so that nothing is missed on your return.
Bracket adjustment in personal income taxes
The upper threshold for the 32.5% marginal tax rate bracket will increase from $87,000 to $90,000. It will apply from 2018-19.
Implemented to address the issue of bracket creep, it is anticipated that the adjustment to the marginal tax bracket will stop a further 200,000 Australians from entering the 37% marginal tax rate bracket.
Moreover, from 1 July 2022, there will be further adjustments made to the brackets. The upper income threshold for the 32.5% bracket will be increased from $90,000 to $120,000. In addition, the upper income threshold for the 19% rate will increase from $37,000 to $41,000. By 2024, the 37% rate will be scrapped. The 32.5% rate will apply up to $200,000.
Low and middle income tax offset
Introduction of a non-refundable tax offset of up to $530 per annum targeted at low to middle income earners. It will affect individuals with taxable income of up to $125,333, and will apply from 2018-19 to 2021-22.
For taxpayers with taxable income of $37,000 or less, the Low and Middle Income Tax Offset will provide a benefit of up to $200.
Between a taxable income of $37,000 and $48,000, the value of the offset will increase by 3 cents in the dollar up to the maximum offset of $530. It is noted that taxpayers with taxable incomes between $48,000 and $90,000 will be eligible to receive the $530 maximum offset.
The offset will phase out at a rate of 1.5 cents per dollar between taxable income between $90,001 and $125,333.
An increase in the Medicare levy low-income thresholds for singles, families, and seniors and pensioners. This will affect low-income earners and will apply 2017-18.
The various exemption thresholds for low-income earners will increase to take into account movements in the CPI. Further, the Government has confirmed that it will not be increasing the Medicare Levy rate from 2.0% to 2.5%.
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