The Australian Federal Government has recently brought forward Stage 2 of their planned tax cuts to help support the struggling Australian economy.
The planned tax cuts have been backdated to 01 July 2021, replacing the original effective date of July 2022.
These tax cuts will mean that anyone earning above $37,001 will see a change in their tax rate, which will result in extra money in their pay each pay period.
The 2020-21 tax cuts are as follows:
- 19% tax bracket will be increased from $37,000 to $45,000.
- 32.5% tax bracket will be increased from $90,000 to $120,000.
- The low-income tax offset will be raised from $445 to $700.
Below we will provide a reflection of the tax cuts you will receive, keep in mind that your income will alter how much you will receive from your tax cuts.
- $21,886 to $45,000: up to $1080
- $45,001 to $90,000: $1080
- $90,001 to $120,000: up to $2430
- $120,000+: $2430
Tax cuts have been pencilled into to take place by the end of 2020, so employees should start seeing an increase in their take home pay by the end of the year.
You may see a boost in your refund at tax time
With the tax cuts being backdated to 1 July, there is roughly 20 weeks between July and December where you have been having extra tax deducted from your pay. So, any missed money from 1 July to when your tax cut was implemented by your employer will be given included in your tax return.
This means that this will either increase your refund or reduce any tax you owe at tax time.
Will the tax cuts affect low- and middle-income earners?
Low and middle income earners have two offsets available to them, both are applied on the tax return as opposed to weekly tax cuts.
- The Low Income Tax Offset
The government announces that along with the tax cuts, their will be increased the Low Income Tax Offset from $445 to $700.
If you are earning up to $37,00 you will receive the full $700 rebated, which means you receive an extra $255 for the 2020-21 Financial Year.
- Low and Middle Income Tax Offset
The second offset for low and middle income earners is the ‘Low and Middle Income Tax Offset’ the amount of LMITO you’re entitled to depends on your taxable income, we break this down in the table below
||2019-2020 LMITO Rebate Amount
|$37,000 or less
Unfortunately, the LMITO is set to end after the 2021 tax year, which means that some low- and middle-income earners may end up paying up to $1,080 more than the 2020 tax year.