Tax cuts are a huge feature of this coronavirus recovery Budget.
Most households will receive a tax cut in the next 12 months, in a bid to encourage more spending to boost economic activity.
How much you get depends on the size of your annual income.
Have a go of the ABC’s interactive tax calculator.
It shows you how much you’ll save compared to what you could have expected for the 2019-20 financial year
|Income||Tax cut from 2020-21||Tax cut from 2021-22||Tax cut from 2024-25|
|$20,000||$0 per year||$0 per year||$0 per year|
|$30,000||$255 per year||$0 per year||$0 per year|
|$40,000||$580 per year||$100 per year||$100 per year|
|$50,000||$1,080 per year||$0 per year||$125 per year|
|$60,000||$1,080 per year||$0 per year||$375 per year|
|$80,000||$1,080 per year||$0 per year||$875 per year|
|$100,000||$1,530 per year||$750 per year||$2,125 per year|
|$120,000||$2,430 per year||$2,250 per year||$4,125 per year|
|$150,000||$2,430 per year||$2,430 per year||$6,405 per year|
|$200,000||$2,430 per year||$2,430 per year||$11,505 per year|
What about people who earn more or less than me?
If your annual income is $35,000, you’ll receive an extra $255 for 2020-21, but nothing extra for the following two years.
If your annual income is $50,000, you’ll receive an extra $1,080 for this financial year (when the extra money starts appearing in your regular pay packet after the bill passes Parliament), nothing extra from 2021-22, and an extra $125 again from 2024-25.
If your annual income is $80,000, you’ll receive an extra $1,080 for this financial year, nothing extra from 2021-22, and an extra $875 again from 2024-25.
If your annual income is $100,000, you’ll receive an extra $1,530 for this financial year, another $750 from 2021-22, and $2,125 from 2024-25.
If your annual income is $120,000, you’ll receive an extra $2,430 for this financial year, another $2,250 from 2021-22, and an extra $4,125 from 2024-25.
What tax cuts have politicians scored?
For Australia’s federal politicians, who receive a base pay over $210,000, they’ll receive an extra $2,430 this year, another $2,430 from 2021-22, and an extra $11,505 from 2024-25.
So when will I get my tax cut?
The Government’s tax cut plan has two features.
Firstly, the Government wants to bring forward the tax changes it had planned to introduce on July 1, 2022, to July 1, 2020.
The tax changes will be backdated to July 1, so the Australia Tax Office will start taking less tax from workers’ pay packets between now and next financial year to ensure households start receiving an immediate boost in their weekly income.
These tax changes include increasing the top threshold of the 19 per cent personal income tax bracket from $37,000 to $45,000, and increasing the threshold of the 32.5 per cent tax bracket from $90,000 to $120,000.
Any other sweetener?
The Government has kept the so-called “low and middle income tax offset” (LMITO) for the 2020-21 financial year, so eligible workers will receive another one-off tax reduction at tax time next year, dependent on the size of their taxable income.
It has also increased the amount from $445 to $700.
For example, workers with a taxable income of $30,000 will enjoy a $255 tax cut (LMITO), and those with a taxable income of $50,000 will receive a $1,080 tax cut (LMITO).
How will tax cuts help the economy recover?
The Federal Government says these tax changes are necessary to put more money into peoples’ pockets this year.
It wants the extra disposable income to encourage households to spend more in coming years so they can help to pull the economy out of the worst recession in 90 years.
According to Treasury’s economic forecasts, households will need the money: it expects wages growth to remain “subdued” for the next four years at least, and the unemployment rate to take until the June quarter 2023 to fall to 6 per cent.
Treasury estimates these tax cut changes will increase gross domestic product by $3.5 billion in 2020-21 and $9 billion in 2021-22 while creating an additional 50,000 jobs by the end of 2021-22 — compared to what would have occurred if the tax cut plan wasn’t changed.
The third stage of the Government’s planned tax cuts — the most controversial element of the package which passed Parliament a number of years ago — has not been brought forward.
They remain in place to begin in 2024-25, meaning the richest taxpayers will have to wait until then to receive tax cuts worth up to $11,000 a year.
[Hearken budget embed – add at end]