All you need to know about the tax cuts


In fact this won’t be the only year you’ll get a refund.

It sounds too good to be true, but this is how it works.

YOU’RE GETTING YOUR OWN MONEY BACK

The money is basically tax you’ve paid throughout the 2018/19 financial year that is being refunded to you because the Government has increased the low and middle income tax offset from $530 to $1080.

This means you have to lodge a tax return for 2018/19 in order to receive the money.

If you have already lodged a tax return, the Australian Taxation Office will automatically process a refund for you.

The new laws were designed to apply to the previous financial year even though they were passed after July 1.

HOW MUCH WILL YOU GET?

The maximum offset of $1080 will be available to taxpayers with taxable incomes of between $48,000 and $90,000. The offset is calculated on each person’s individual income not household income.

Those who earned less than $37,000 will get $255 back. This gradually increases to $1080 for those earning $48,000.

Anyone earning between $90,000 and $126,000 will get lower amounts. Those earning over $126,000 won’t receive any refund.

You can figure out an approximate amount using the tax relief estimator on the Australian Government’s Budget 2019/20 site, as the Government already flagged the changes last year.

However, the estimator may return a higher amount as it includes benefits from previous changes included in the 2018/19 Budget as well as the 2019/20 Budget. This includes increasing the 19 per cent threshold from $37,000 to $41,000 (which people would already have seen reflected in their pay packets) and increasing the low income tax offset from $645 to $700.

THERE’S MORE GOOD NEWS

You will continue to get the lump sum payments (depending on your income of course) for the next three financial years, up to and including 2021/22.

This is because most of the tax relief is being delivered as an offset payment, not as actual changes to tax brackets.

After this more changes will come into effect.

Many Australians will get a larger than normal tax refund this year.Source:Supplied

BIGGER CHANGES PLANNED

From July 1, 2022, the Government will start changing tax brackets permanently.

The cut-off for the 19 per cent tax bracket will be increased from $41,000 to $45,000.

The 32.5 per cent tax bracket threshold will rise from $90,000 to $120,000 (a measure the Government made law earlier in a separate change).

This means people will then start seeing more money in their weekly, fortnightly or monthly pay packets.

From July 1, 2024 the 32.5 per cent tax rate will be lowered to 30 per cent. This means anyone earning between $45,000 and $200,000 will pay 30 per cent tax.

At this point about 94 per cent of Australian taxpayers will be covered by the 30 per cent tax rate, a huge jump from the 16 per cent who are currently in this tax bracket.

Continue the conversation @charischang2 | charis.chang@news.com.au





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