1. Personal income tax changes
1.1 Personal income tax plan
The Government will introduce a seven-year, three-step, Personal Income Tax Plan, as follows:
Step 1: Targeted tax relief to low and middle income earners
The Government will introduce the Low and Middle Income Tax Offset, a non-refundable tax offset of up to $530 per annum to Australian resident low and middle income taxpayers. The offset will be available for the 2019, 2020, 2021 and 2022 income years and will
be received as a lump sum on assessment after an individual lodges their tax return.
The benefit of the proposed Low and Middle Income Tax Offset is as follows:
Taxpayers with taxable incomes of $37,000 or less will receive a benefit of up to $200;
For taxpayers with taxable incomes between $37,000 and $48,000, the value of the offset will increase at a rate of three cents per dollar to the maximum benefit of $530;
For taxpayers with taxable incomes from $48,000 to $90,000 a $530 offset applies; and
For taxpayers with taxable incomes from $90,001 to $125,333, the offset will phase out at a rate of 1.5 cents per dollar.
The benefit of the Low and Middle Income Tax Offset is in addition to the Low Income Tax
Step 2: Protecting middle income Australians from bracket creep
The Government has proposed the following changes to the personal income tax rates:
From 1 July 2018, the Government will increase the top threshold of the 32.5% personal
income tax bracket from $87,000 to $90,000
From 1 July 2022, the Government will:
extend the 19% personal income tax bracket from $37,000 to $41,000; and further increase
the top threshold of the 32.5% personal income tax bracket from $90,000 to $120,000.
The Government has also proposed an increase to the Low Income Tax Offset from $445 to
$645 from 1 July 2022.
Step 3: Ensuring Australians pay less tax by making the system simpler
In the third step of the Personal Income Tax Plan the Government will simplify and flatten the
personal tax system by removing the 37% tax bracket entirely.
From 1 July 2024, the Government will extend the top threshold of the 32.5% personal
income tax bracket from $120,000 to $200,000. The 32.5% tax bracket will apply to taxable
incomes of $41,001 to $200,000 and taxpayers with taxable incomes exceeding $200,000
will pay tax at the top marginal rate of 45%.
1.2 Changes to the Medicare levy low-income thresholds
The Government will increase the Medicare levy low- income thresholds for singles, families,
and seniors and pensioners from the 2018 income year, as follows:
The threshold for singles will be increased from $21,655 to $21,980;
The family threshold for will be increased from $36,541 to $37,089;
The threshold for single seniors and pensioners will be increased from $34,244 to $34,758;
The family threshold for seniors and pensioners will be increased from $47,670 to $48,385.
For each dependent child or student, the family income thresholds increase by a further
$3,406, instead of the previous amount of $3,356.