Some major changes has been made in tax structure in budget 2018-19 and a long term plan will further make changes to the overall tax brackets. The tax relief has been welcomes by the low earners, sole traders and small businesses.
as per this article on ato website, If you are a low- middle earner or small business owner then this what you need to know:
Immediate relief to low and middle income earners
The Government’s targeted tax relief of up to $530 will be delivered to middle and lower income earners through a new tax offset for the 2018‒19, 2019‒20, 2020‒21 and 2021‒22 income years.
It is expected that around 4.4 million people will receive the full $530 benefit for 2018‒19. It will be in addition to the current low income tax offset.
Prior to this it was declared that from 1st July 2016- a small business tax discount of 8% of income tax is available for businesses under $5 million turnover (capped at $1000/ yr) – Only for Sole traders or Partnership business structure.
So overall some really good news for small businesses and low earners.
Protecting against bracket creep
The top threshold of the 32.5 per cent tax bracket will be further increased to $90,000 from 1 July 2018, having already been increased from $80,000 to $87,000 in 2016‒17.
From 2022‒23, the benefits of the Step 1 tax offset will be locked in by increasing the top threshold of the 19 per cent tax bracket from $37,000 to $41,000 and increasing the low income tax offset from $445 to $645. Together these changes will mean that taxpayers permanently receive the benefits from Step 1 of the plan.
In addition, the top threshold of the 32.5 per cent bracket will be further increased to $120,000, ensuring that the average income earner remains in this middle tax bracket.
Making personal income taxes simpler and flatter
From 1 July 2024, the personal income tax system will be simplified by abolishing the 37 per cent tax bracket entirely, reducing the number of tax brackets from five to four.
Australians earning more than $41,000 will only pay 32.5 cents in the dollar all the way to the top marginal tax rate threshold.
These changes ensure that most Australians will face a marginal tax rate no higher than 32.5 per cent for their working life.
By 2024‒25 some 94 per cent of taxpayers are projected to face a marginal tax rate of 32.5 per cent or less.
High income earners will continue to pay their fair share
The top marginal tax rate of 45 per cent will apply to incomes above $200,000.
In 2015‒16, the top 20 per cent of taxpayers paid around 61 per cent of all personal income tax. Under the Personal Income Tax Plan, this cohort is projected to continue to contribute a broadly similar share.
These changes demonstrate the Government’s commitment to taxes that are lower, fairer and simpler.
The Government’s seven–year Personal Income Tax Plan means more Australians will face lower rates of tax.
Vikas Rana
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