The Federal Government is proposing changes to the personal income tax cuts initially set to begin on July 1, 2024. The three-points plan announced in the 2018-19 Federal Budget, aimed to address the issue of tax rates not keeping up with wage growth.
The original plan, scheduled for Stage 3 in 2024, is now being reconsidered. Instead of the current design, the government plans to redistribute the benefits to focus on individuals with taxable income below $150,000. This adjustment is a response to the rising cost of living, according to the Prime Minister.
Under the proposed changes, Australian taxpayers with income below $135,000 will receive more significant tax cuts. The new approach is estimated to increase government revenues from personal income tax by $28 billion by 2034-35 due to inflation pushes income into higher tax brackets.
Specifically, individuals with taxable income below $135,000.00 will see larger tax cuts than originally planned. For instance, someone earning $40,000 will now receive a $654 tax cut, compared to no cut under the existing Stage 3 plan. A person with a $100,000 income will get a tax cut of $2,179.
However, high earners, like those making $200,000, will experience a reduced benefit, receiving around half of the anticipated cut. Despite this, they will still benefit compared to the current tax rates.
Low-income earners will also see relief, with the Medicare Levy low-income threshold increasing by 7.1% to $26,000. Individuals won’t pay the full 2% Medicare Levy until their income reaches $32,500 for singles.
Any change in the tax rates is an opportunity to review and reset to ensure you are taking advantage of the opportunities available, and not paying more than you need. If you have any concerns about the impact of the proposed changes, please call Innovus Accounting on 4258 0099 or https://innovusadvice.com.au/contact-us/ to discuss.