It’s finally a little bit of good news for individuals with an announcement in late January for proposed tax rate and threshold changes. The changes will be debated in parliament but are expected to come info effect on 1 July.
Tax Cuts
The government proposes that all 13.6 million taxpayers across the country will receive a tax cut under Labor’s Better Tax Cuts Plan, but for many on higher incomes it will be a smaller tax cut than they were expecting. Although the plan delivers a permanent reduction in tax for all taxpayers, those earning between $50,000 and $130,000 will see the biggest benefit from the reported changes.
The Changes
From 1 July 2024, the tax changes will include:
- Reduction of the 19% tax rate to 16% (for incomes between $18,200 and $45,000).
- Reduction of the 32.5% tax rate to 30% (for incomes between $45,000 and the new $135,000 threshold).
- Increase the threshold at which the 37% tax rate applies from $120,000 to $135,000.
- Increase the threshold at which the 45 % tax rate applies from $180,000 to $190,000.
The last tax plan was designed five years ago – prior to the pandemic, the global inflation spike and interest rate rises. With Australians doing it tough for the past few years with these global issues, it is sure to be a welcome change.
The Medicare Levy
The medicare levy applies a flat 2% charge to most taxpayers, which is effectively extra income tax. It helps fund some of the costs of Australia’s public health systems known as Medicare.
The Government has announced it is increasing the Medicare levy low‑income thresholds, meaning a reduction or elimination to the amount of Medicare levy paid by more than a million Australians on lower incomes.
The government will increase the Medicare levy low-income thresholds by 7.1% for singles, families, seniors and pensions, in line with inflation.
This means those with a taxable income of up to $26,000 will not be liable for the Medicare levy. The full 2 % levy will be payable by anyone earning $32,500 or more.
Seniors and pensioners will be able to earn up to $41,089 before the levy kicks in. The full 2 % levy will be payable when earnings reach $51,361.
Families will be able to earn up to $43,486, with the full levy payable at $54,807.
Under the changes, it’s estimated a single person earning $30,000 will receive $172.40 in extra tax relief each year. Single pensioners would be up to $272.40 better off, while families would save up to $344.10.
To get an estimate of your tax cut, use this calculator: https://treasury.gov.au/tax-cuts/calculator
It’s crucial for individuals to stay informed about tax changes and understand how they may affect their finances. Seeking professional guidance can provide personalised advice and help navigate through these adjustments
