The announcement brings forward the planned income tax cuts for around 11 million Australians and backdates them to July 2020. The announcement also allows for businesses that make new investments to write-off all of their costs in one year.
The Federal Government pledged $17.8 billion worth of personal tax cuts in its budget. Under the changes, the government will bring forward the second stage of its tax cuts originally legislated for July 1, 2022 as well as a one-off tax benefit for low and middle-income earners.
Australian Treasurer, Josh Frydenbreg, has said that the Australian Tax Office (ATO) will work to release amended PAYG tax tables as soon as possible, with the aim of having monies into employees’ pockets before the end of the year.
In summary, the one-off tax relief measures are as follows:
- For employees earning up to $37,000 a year, they’ll receive a one-off tax relief of up to $510.
- Earners on $37,001 to $48,000 will receive a one-off tax relief of between $510 and $2160.
- For those on $48,001 to $90,000 will receive tax relief of between $2160 and $2295.
- Finally, employees earning from $90,001 up to $126,000 will receive a tax relief of between $2295 and $2745.
- Those earning over $126,000 will not receive a one-off tax relief.
The stage two tax cuts involves three changes:
- The low-income tax offset will increase from $445 to $700, providing an additional $255 in tax relief.
- The top threshold of the 19 per cent tax bracket will increase from $37,000 to $45,000.
- The tax bracket which slaps income earners 32.5 per cent will increase from $90,000 to $120,000.
The income tax cuts are worth $17.8 billion over four years, while business tax cuts and other measures are worth $31.5 billion, bringing the total cost of the package to the Budget bottom line close to $50 billion.
"We were successful in being able to pass what are critical tax changes for businesses to be able to invest in their future, creating jobs right across the country to ensure that we can come out of this COVID-19 recession," Prime Minister Scott Morrison said.
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