Budget Update – Individuals
Personal tax rates – no changes were made to personal tax rates, the Government having already brought forward the Stage 2 tax rates to 1 July 2020. The Stage 3 personal income tax cuts remain unchanged and will commence in 2024-25 as already legislated.
Rates and threshold tables - summary
| Tax rates and income thresholds | |||
|---|---|---|---|
| Rate | 2020-21 | 2021-22 to 2023-24 | From 1.7.2024 (unchanged) |
| Nil | $0 – $18,200 | $0 – $18,200 | $0 – $18,200 |
| 19% | $18,201 – $45,000 | $18,201 – $45,000 | $18,201 – $45,000 |
| 30% | $45,001 – $200,000 | ||
| 32.5% | $45,001 – $120,000 | $45,001 – $120,000 | N/A |
| 37% | 120,001 – $180,000 | 120,001 – $180,000 | N/A |
| 45% | $180,001 + | $180,001 + | $200,001 + |
| Low and middle income tax offset (LMITO) | Up to $1,080 | Up to $1,080 | N/A |
LMITO retained for 2021-22 – the Government will retain the low and middle income tax offset for the 2021-22 income year. The LMITO provides a reduction in tax of up to $1,080.
| Low and middle income tax offset for 2021-22 (unchanged from 2020-21) | |
|---|---|
| Taxable income (TI) | Amount of offset |
| $0 – $37,000 | $255 |
| $37,001 – $48,000 | $255 + ([TI – $37,000] x 7.5%) |
| $48,001 – $90,000 | $1,080 |
| $90,001 – $126,000 | $1,080 – ([TI – $90,000] x 3%) |
| $126,001 + | Nil |
| Low income tax offset for 2021-22 (unchanged from 2020-21) | |
|---|---|
| Taxable income (TI) | Amount of offset |
| $0 – $37,500 | $700 |
| $37,501 – $45,000 | $700 – ([TI – $37,500] x 5%) |
| $45,001 – $66,667 | $325 – ([TI – $45,000] x 1.5%) |
| $66,668 + | Nil |
Individual residency test reformed – the Government will replace the existing tests for the tax residency of individuals with a primary “bright line” test under which a person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident.
Employee share schemes – the Government will remove the cessation of employment as a taxing point for the tax deferred employee share schemes.
ATO debt recovery – the AAT will be given the power to pause or modify ATO debt recovery action in relation to disputed debts of small businesses.
Self-education expenses – $250 threshold to be removed.
Medicare levy low-income thresholds – For the 2020-21 income year, the Medicare levy low-income threshold for singles will be increased to $23,226 (up from $22,801 for 2019-20). For couples with no children, the family income threshold will be increased to $39,167 (up from $38,474 for 2019-20). The additional amount of threshold for each dependent child or student will be increased to $3,597 (up from $3,533).
For single seniors and pensioners eligible for the SAPTO, the Medicare levy low-income threshold will be increased to $36,705 (up from $36,056 for 2019-20). The family threshold for seniors and pensioners will be increased to $51,094 (up from $50,191), plus $3,597 for each dependent child or student.
Date of effect – The increased thresholds will apply to the 2020-21 and later income years. Note that legislation is required to amend the thresholds and a Bill will be introduced shortly.
Full income tax exemption for ADF personnel deployed to Operation Paladin – The Australian Government will provide a full income tax exemption for the pay and allowances of Australian Defence Force (ADF) personnel deployed to Operation Paladin from 1 July 2020. Operation Paladin is Australia’s contribution to the UN’s Truce Supervision Organisation, with ADF personnel deployed in Israel, Jordan, Syria, Lebanon and Egypt. This measure ensures that ADF personnel are subject to consistent tax treatment regardless of the operational area of Operation Paladin to which they are deployed.
Child care subsidies to change 1 July 2022 – The Budget confirmed that the Government will make an additional $1.7b investment in child care. The changes will commence on 1 July 2022, i.e. not in the next financial year. This measures was previously announced on 2 May 2021.
Commencing on 1 July 2022, the Government will:
- Increase the child care subsidies available to families with more than one child aged 5 and under in child care by adding
- An additional 30 percentage point subsidy for every second and third child (stated to benefit around 250,000 families);
- Remove the $10,560 cap on the Child Care Subsidy (stated to benefit around 18,000 families).
The Treasurer states that, under the Government’s changes, a single parent on $65,500 with 2 children in 5 days of long day care who chooses to work a fifth day will be $71 a week better off compared to the current system. He further states that, under these changes, a family earning $110,000 a year will have the subsidy for their second child increase from 72% to 95%, and would be $95 per week better off for 4 days of care.
Date of effect – 1 July 2022