2018-19 Federal Budget Report: Personal Tax

Tax Relief to encourage and reward working Australians

The Government is providing welcome tax relief to low and middle income earners. Historically, such measures have only targeted low income earners and forgotten middle income earners.

What was announced

  • Seven Year Personal Income Tax Plan
    • Providing immediate relief for low and middle income earners
    • Tackling ‘bracket creep’
    • Abolishing the 37% tax bracket
  • No increase to the Medicare levy
  • Increasing the Medicare levy low income threshold
  • Income tax exemption for certain Veteran Payments

Seven Year Personal Income Tax Plan

The Government’s Personal Income Tax Plan will:

1. Provide immediate relief for low and middle income earners

The Government will introduce a non-refundable Low and Middle Income Tax Offset to provide relief of up to $530 p.a for the 2019 to 2022 income years. The offset will be received as a lump sum on assessment after the individual’s income tax return is lodged.
Importantly, the Low and Middle Income Offset is in addition to the current Low Income Tax Offset.

​2. Tackling ‘bracket creep’

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 Low Income Tax Offset will increase from $445 p.a. to $645 p.a.
Also from 1 July 2022, the upper threshold of the 19% personal income tax bracket will increase from $37,000 to $41,000 and the upper threshold of the 32.5% personal income tax bracket will increase from $90,000 to $120,000.

3. Abolishing the 37% tax bracket

The 37% tax bracket will be abolished from 1 July 2024 by increasing the upper threshold of the 32.5% personal income tax bracket from $120,000 to $200,000.

Going forward, the 32.5% marginal tax rate will apply to taxable incomes of $41,001 to $200,000 and the top marginal rate of tax of 45% will apply to taxable incomes exceeding $200,000.

No increase to the Medicare levy

The increase of the Medicare levy to 2.5% from 1 July 2019 will not proceed, and the levy will remain at 2% of taxable income. Consequently, changes to other tax rates, such as the Fringe Benefits Tax rate, will also not proceed.

Increase to the Medicare levy low income threshold

The Government will increase the Medicare levy low income thresholds for singles, families, seniors, and pensioners from the 2018 income year:

Singles                                              from $21,655 to $21,980
Families *                                          from $36,541 to $37,089
Single seniors and pensioner            from $34,244 to $34,758
Family seniors and pensioners *       from $47,670 to $48,385   

*Add $3,406 (previously $3,356) for each dependent child or student   

Income tax exemption for certain Veteran Payments

From 1 May 2018, certain supplementary payments paid to veterans will be exempt from income tax, including pension supplements, rent assistance, and remote area allowances. Payments made to spouses or partners of veterans who die will also be exempt.