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: