Here's how much income tax you will save from next month

Stefan Postles/Getty ImagesTreasurer Scott Morrison

The tax cuts outlined in last month’s federal budget successfully passed the Senate today.

Treasurer Scott Morrison’s plan is to have just three tax rates by 2024, with 94% of workers earning between $41,000 and $200,000 paying 32.5% tax on their income.

The passing of the legislation means that most will be paying less tax from July 1 when the threshold of the 32.5% tax bracket will shift to $90,000 from $87,000.

This will provide a tax cut of up to $135 a year to 3 million people and will prevent about 200,000 people from facing a marginal tax rate of 37%.

The top bracket of the 32.5% rate will then be further increased to $120,000 from $90,000 from July 2022, a saving of up to $1350 a year.

That change is projected to prevent about 1.8 million people moving to a higher marginal tax rate of 37% in 2022–23.

A new, non-refundable tax offset will provide tax relief of up to $530 to low and middle income earners from the financial year starting next month.

The offset will be a lump sum given at tax return time each year.

Here’s how the tax thresholds change from July 1, according to the federal budget papers:

From July 1, someone earning:

  • $22,000 a year will pay $200 less tax,
  • $40,000 a year will pay $290 less tax,
  • $50,000 a year will pay $530 less tax.

And those on the average wage of about $84,600 would pay $530 less tax.

Here’s how the tax savings look over seven years:

And for higher incomes:

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