2019-20 Federal Budget Report: Personal Taxation

The Government is delivering further tax cuts for individuals to provide immediate relief to low and middle-income earners.  By 2024-25 approximately 94% of Australian taxpayers are expected to face a marginal rate of 30% or less.

What was announced

  • Increase in the non-refundable low and middle income tax offset (LMITO)
  • Increase in the top threshold of the 19% personal income tax bracket
  • Reduction of the 32.5% marginal tax rate to 30%
  • Medicare levy low-income thresholds increased
  • High net wealth individuals will be subject to increased scrutiny by the ATO Tax Avoidance Taskforce

Increase in the non-refundable low and middle income tax offset (LMITO)

For the 2019 to 2022 financial years, individuals with taxable incomes up to $126,000 will be eligible to receive a reduction in tax through the low and middle income tax offset.

Tax savings are as follows:
Taxable income Tax saving
$37,000 or less Up to $255
$37,000 - $48,000 Offset increases at a rate of 7.5c per $ to a maximum offset of $1,080
$48,000 - $90,000 $1,080
$90,000 - $126,000 Offset phases out at 3c per $1

Increase in top threshold of the 19% personal income tax bracket

The top threshold of the 19% tax bracket will be increased from $41,000 to $45,000 once the LMITO ceases on 30 June 2022.  The low income tax offset (LITO) will continue from 1 July 2022, increasing from $645 to $700. These changes will lock in the reduction in tax provided by the LMITO when the LMITO is removed.

Reduction of 32.5% marginal tax rate to 30%

From 1 July 2024, the 32.5% marginal rate of tax will be reduced to 30%.
This measure more closely aligns the middle tax bracket of the personal income tax system with corporate tax rates.

This is in conjunction with abolishing the 37% tax bracket, as announced in last year’s budget, meaning that from 1 July 2024, the 30% marginal rate of tax will apply to individuals with taxable income up to $200,000.

Medicare levy low-income thresholds increased

The Medicare levy low-income thresholds will be increased to reflect recent movements in the CPI so that low-income taxpayers generally continue to be exempted from paying the Medicare levy.

 
Type of taxpayer Threshold change
Single From $21,980 to $22,398
Family (with no children) From $37,089 to $37,794
Single seniors and pensioners eligible for the Seniors and Pensioners Tax Offset (SAPTO) From $34,758 to $35,418
Family of seniors and pensioners From $48,385 to $49,304
Per dependent child or student Increase from $3,406 to $3,471


High net wealth individuals will be subject to increased scrutiny by the ATO Tax Avoidance Taskforce

The Government is providing increased funding of $1 billion over the next 4 years to extend and expand the Tax Avoidance Taskforce.   The Taskforce undertakes compliance activities targeting multinationals, large public and private groups, trusts and high wealth individuals. The increased funding will allow for increased scrutiny of specialist tax advisors and intermediaries that promote tax avoidance schemes and strategies.