Federal Budget Overview 2020/21 - Personal Income Tax

As part of the Government's JobMaker Plan, the tax cuts originally planned for July 2022 will be brought forward and backdated to July 1, 2020. They have lifted the threshold for the 19 per cent tax rate to $45,000 and the 32.5 per cent threshold to $120,000. The low and middle-income tax offset will also remain.

The Government’s Personal Income Tax Plan was designed to lower personal taxation and was to be implemented in three stages with Stage 1 implemented in June 2018. Stage 2 was to commence in 2021, however, this budget brings forward those tax cuts as well as a one-off additional benefit from the low and middle income tax offset in 2020/21. Stage 3 of the Government's Personal Income Tax Plan remains in place for roll-out in 2024/25.

In 2020/21, low and middle income earners will receive tax relief of up to $2,745 for singles, and up to $5,490 for dual income families, compared with the 2017/18 rates. The majority of the tax benefit for 2020/21 will go to those on incomes below $90,000. Refer to the table below.

TAX RATE & THRESHOLDS IN 2017/18 COMPARED TO 2024/25

Tax Rates in 2017/18 Thresholds 2017/18 Tax Rates in 2024/25
 Thresholds 2024/25
Nil
Up to $18,200
Nil
Up to $18,200
19%
$18,201 - $37,000
19%
$18,201 - $45,000
32.5%
$37,001 - $90,000
30%
$45,001 - $200,000
37%
$90,001 - $180,000
 
 
45%
$180,000 +
45%
$200,000 +
Low income tax offset
Up to $445
Low income tax offset
Up to $700

TAX RELIEF BASED ON TAXABLE INCOME IN 2020-21 COMPARED TO 2017/18

Taxable Income
2017/18 Tax Liability ($)
2020/21 Tax Liability ($)
Change in tax ($)
Change in tax (%)
40,000
4,947
3,887
-1,060
-21.4
60,000
12,147
9,987
-2,160
-17.8
80,000
19,147
16,987
-2,160
-11.3
100,000
26,623
24,187
-2,445
-9.2
120,000
34,432
31,687
-2,745
-8.0
140,000
42,232
39,667
-2,565
-6.1
160,000
50,032
47,467
-2,565
-5.1
180,000
57,832
55,267
-2,565
-4.4
200,000
67,232
64,667
-2,565
-3.8


SUPERANNUATION

The Government has announced that, from July 1, 2021 they will implement a proposal to ‘staple’ an existing superannuation account to an individual as they move between jobs. The purpose of this measure is to reduce duplication of superannuation accounts for individuals when they change jobs and do not nominate their existing fund with their new employer (or otherwise do not consolidate their super if a new account is created for them). 

This is a welcomed measure which reflects a proposal recently made by the Productivity Commission. Pitcher Partners expects that the changes will improve the employee onboarding process for both employees and employers, and that future enhancements to payroll software will further simplify administrative processes on commencement of employment. 

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