The Australian Treasurer has announced modest income tax relief for low- and middle-income earners in his Budget, along with massive tax cuts for high earners, which will commence in seven years' time.
According to News.com.au, Scott Morrison has indicated that workers earning up to AUS$37,000 (US$28,013) a year will have their tax bills cut by a maximum of AUS$200 (US$151). But the tax cut will not come though their weekly pay packet and will instead be delivered as a lump sum via a tax offset in annual tax returns from 1 July.
Australians earning more than AUS$37,000 a year can expect to receive an additional sum of up to AUS$530 (US$401) per annum via the same annual tax offset. The government also plans to extend tax breaks in 2022-23 by lifting the AUS19c (14.4c) tax threshold from AUS$37,000 (US$28,013) to AUS$41,000 (US$31,042), which means half a million Australians will not have to pay the higher 24.6% rate. About 4.4 million taxpayers, who are in this income bracket, will receive up to AUS$530 (US$401) in tax relief.
The government likewise announced its intentions to change income tax thresholds in order to ward off bracket creep, which occurs when pay rises and overtime bonuses are eaten up in higher taxes.
The 32.5% tax bracket will be extended from AUS$87,000 (US$65,869) to AUS$90,000 (US$68,141) as of 1 July , which means that 210,000 Australians earning more than AUS$87,000 (US$65,869) will no longer pay the 37% rate. The tax offset will also apply to those earning more than AUS$90,000 (US$68,141) a year but will taper off to zero as incomes reach AUS$125,000 (US$94,649).
There are likewise plans to provide major tax relief to higher earners further down the track. In 2022-23, the government will lift the marginal tax rate of 32.5% from AUS$90,000 (US$68,141) to AUS$120,000 (US$90,854).
In 2024-25, it also intends to abolish the second highest tax rate of 37%, shrinking the number of income tax brackets from five to four by lifting the 32.5% marginal tax rate threshold from AUS$87,000 (US$65,869) to AUS$200,000 (US$151,423). This means that 1.8 million taxpayers will avoid paying the higher 37% rate, and 94% of all Australians will pay tax at no higher a rate than 32.5%.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
The Australian Treasurer has announced modest income tax relief for low- and middle-income earners in his Budget, along with massive tax cuts for high earners, which will commence in seven years' time.
According to News.com.au, Scott Morrison has indicated that workers earning up to AUS$37,000 (US$28,013) a year will have their tax bills cut by a maximum of AUS$200 (US$151). But the tax cut will not come though their weekly pay packet and will instead be delivered as a lump sum via a tax offset in annual tax returns from 1 July.
Australians earning more than AUS$37,000 a year can expect to receive an additional sum of up to AUS$530 (US$401) per annum via the same annual tax offset. The government also plans to extend tax breaks in 2022-23 by lifting the AUS19c (14.4c) tax threshold from AUS$37,000 (US$28,013) to AUS$41,000 (US$31,042), which means half a million Australians will not have to pay the higher 24.6% rate. About 4.4 million taxpayers, who are in this income bracket, will receive up to AUS$530 (US$401) in tax relief.
The government likewise announced its intentions to change income tax thresholds in order to ward off bracket creep, which occurs when pay rises and overtime bonuses are eaten up in higher taxes.
The 32.5% tax bracket will be extended from AUS$87,000 (US$65,869) to AUS$90,000 (US$68,141) as of 1 July , which means that 210,000 Australians earning more than AUS$87,000 (US$65,869) will no longer pay the 37% rate. The tax offset will also apply to those earning more than AUS$90,000 (US$68,141) a year but will taper off to zero as incomes reach AUS$125,000 (US$94,649).
There are likewise plans to provide major tax relief to higher earners further down the track. In 2022-23, the government will lift the marginal tax rate of 32.5% from AUS$90,000 (US$68,141) to AUS$120,000 (US$90,854).
In 2024-25, it also intends to abolish the second highest tax rate of 37%, shrinking the number of income tax brackets from five to four by lifting the 32.5% marginal tax rate threshold from AUS$87,000 (US$65,869) to AUS$200,000 (US$151,423). This means that 1.8 million taxpayers will avoid paying the higher 37% rate, and 94% of all Australians will pay tax at no higher a rate than 32.5%.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
