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An Update from the Past!!
In the budget of the year 2018-19, Federal Budget was passed by the Parliament in June 2018. The budget consisted of some updations and the legislation has introduced some changes to income tax thresholds and tax offsets.
What are the Major Updations in 2018-19 Budget?
The changes that were announced in the 2018-19 Budget would now be followed as Law. The Law and its amendments include the following pointers:
- Income Tax Rate thresholds updated for the 2018-19, 2022-23, and 2024-25 income years
- Low and Middle-Income Tax Offset reduced for tax payable by low and middle-income earners in 2018-19, 2019-20, 2020-21, and 2021-22 income years
- New Low-Income Tax Offset from 2022-23 income year. This will replace the new low and middle-income tax offset and current low-income offset.
The following tabular format will outline the rates and applicable thresholds. Also, mentioned are the offset entitlements related to these amendments.
| Rate | Income Range ($) From July 1, 2018 | Income Range ($) From July 1, 2022 | Income Range ($) From July 1, 2024 |
| Tax Free | 0–18,200 | 0–18,200 | 0–18,200 |
| 19% | 18,201–37,000 | 18,201–41,000 | 18,201–41,000 |
| 32.5% | 37,001–90,000 | 41,001 – 200,000 | 41,001 – 200,000 |
| 37% | 90,001–180,000 | 120,001–180,000 | – |
| 45% | > 180, 000 | > 180, 000 | > 200, 000 |
| New Low and Middle-Income Tax Offset | Utmost 530 | – | – |
| Current Low-Income Tax Offset | Utmost 445 | – | – |
| New Low-Income Tax Offset | – | Utmost 645 | Utmost 645 |
What About the Increased Income Tax Rate Thresholds?
For the income years 2018-19, 2022-23, and 2024-25, new income tax thresholds are in existence. The changes are applicable to all of the residents, foreign-residents, and working holidaymakers. The Pay As You Go (PAYG) withholding rates and their schedules would also be updated on a timely basis.
The increased income tax thresholds are as mentioned below:
- For income years 2018-19, 2019-20, 2020-21, and 2021-22, the top threshold for 32.5% tax bracket individuals would increase from $87,000 to $90,000.
- For income years 2022-23 and 2023-24, the top threshold would be
- For 19% tax bracket will be from $37,000 to $41,000.
- For 32.5% tax bracket will be from $90,000 to $120,000.
- For the 2024-25 income year, the top threshold for 32.5% bracket would be from $120,000 to $200,000.
Something More About New Low and Middle-Income Tax Offset
For the income years 2018-19, 2019-20, 2020-21, and 2021-22, new income tax thresholds are in existence. The new low and middle-income tax offset are for the Australian Resident Individuals (and particular trustees) wherein the income should not exceed $125,333. Entitlement to this would be available after the tax return lodgement.
If the income of the individual:
- Don’t exceed $37,000, the entitlement is of $200.
- Is in between $37,000 and $48,000, entitlement is of $200 plus 3% of the income amount exceeding $37,000.
- Is in between $48,000 and $90,000, the entitlement is of $530.
- Exceeds $90,000, entitlement is of $530 less 5% of the income amount exceeding $90,000.
What is the New Low-Income Tax Offset?
The new low-income tax offset is applicable w.e.f. 2022-23 income years. This offset will replace both the current low-income tax offset and the low and middle-income tax offset. Along with current low-income tax offset, the employed individuals with taxable income not exceeding above $66, 667 will be considered under new low-income tax offset and will be evaluated accordingly.
The reduction in the New Low-Income Tax Offset is:
- 5% of the amount when the individual income is between $37,000 and $41,000.
- Further 1.5% of the income amount above $41,000.
Final Words
The Federal Government is gearing up its socks for providing the best of benefits in their salary range with such taxation offset amendments. The Australian Taxation is moving to a more secure and resident-friendly environment which will reduce the burden on government and individuals alike.
