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How the low and middle-income tax offset will benefit individuals

Transcript, 4 April 2019: Post-Budget comments the low and middle-income tax offset 

BOB DEUTSCH:  I’m Bob Deutsch from The Tax Institute and I just want to tell you a little bit about what happened in the Budget the other night. 

As most of you will know, there are a number of changes that have been announced by the Government, some of them taking effect immediately, and some of them taking effect way into the future. When I say way into the future - not until about 2024-25. 

Just remember, with those more postponed measures, that is at least two Federal Elections away and anything could happen in that time, indeed anything can and will happen as soon as the next month, so I wouldn’t be spending those tax cut measures until you get there – or until we get a lot closer. 

More immediately, there will be some benefits that taxpayers will receive from some of those changes starting this year. 

The first one that I’ll mention is the personal income tax cuts, and they are relatively small at a micro level, but quite large in macro terms, having regard to how much the Federal Government will be spending in delivering those changes. 

The first one that I’ll mention is the low and middle-income tax offset which will benefit individuals, potentially to the tune of a little bit over $1,000 a year, and for a couple, a little bit more than $2,000 a year. 

Again, I emphasize, that’s not huge dollars for most individual people, but it’s better than nothing at all. 

Those measures will flow through with immediate effect because they will apply to the 2018-19 tax year. So when you are preparing individual tax returns, you will need to take into account the low and middle-income tax offset, assuming that it is legislated and passed into law by the current, or the next Government. 

The other point that I should mention about that low to middle-income tax offset is that it already exists, but it’s at a much lower level. From 2018-19 it will be at this more substantial level. 

The people who will gain most from that will be people who sit with income somewhere between $45,000 and about $95,000 per year. 

People up to $126,000 will benefit, but outside that bracket, it’d be a lesser benefit than the numbers I’ve already given. 

There will be two other benefits flowing in relation to personal income tax in future years – two in particular. 

One of them will be the reduction of the 32.5% rate to 30%; and an increase in the threshhold where it kicks in from $41,000 to $45,000. Again, fairly minor benefits, but they will be important. 

They’re not slated to commence for a number of years. 

So, as I said earlier, I wouldn’t be paying too much attention to them just yet.

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