Low and Middle Income Tax Offset (LMITO)

The Low and Middle Income Tax Offset (LMITO) of $1,080 will be increased by a cost of living offset of $420 for the 2021-22 income year.

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This increase means individuals earning between $48,000 and $90,000 are set to receive a LMITO of $1,500 in their 2022 tax return. Consistent with the existing LMITO scheme, the offset will be phased out for individuals with taxable incomes of $90,000 to $126,000.

Taxable income LMITO
Up to $37,000 $675
$37,001 to $48,000 $675 plus 7.5 cents for each dollar over $37,000 up to $1,500
$48,001 to $90,000 $1,500
$90,001 to $126,000 $1,500 less 3 cents for each dollar over $90,000

Medicare levy low-income thresholds

Effective from 1 July 2021, the Medicare levy low-income thresholds will increase for singles, families, seniors and pensioners to take into account recent movements in the CPI.

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2020/2021 2021/2022
Singles $23,226 $23,365
Families $39,167 $39,402
Single seniors and pensioners $36,705 $36,925
Family seniors and pensioners $51,094 $51,401

For each dependant child or student, the family income thresholds will increase by a further $3,619, an increment from the previous amount of $3,597.

COVID-19 testing

Costs of taking a COVID-19 test to attend a place of work are tax deductible for individuals from 1 July 2021.  

Paid parental leave

The Federal Government will combine the two weeks of ‘Dad and Partner Pay’ with the 18 weeks of Parental Leave Pay to create a single scheme to cover up to 20 weeks of paid parental leave.

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The single scheme will allow for eligible working parents to split the leave. It will also allow single parents to access an additional two weeks of paid leave.

The income test will also be broadened to have an additional household income eligibility test.

Existing reductions in tax rates

The already legislated Personal Income Tax Plan has delivered an estimated $40 billion in tax relief since the start of the pandemic.

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The current personal tax rates (applicable from 1 July 2020) formed Stage 2 of the Plan:

Taxable Income Tax % on excess
$18,200 Nil 19%
$45,000 $5,092 32.5%
$120,000 $29,467 37%
$180,000 $51,667 45%

The new cost of living offset ($420) together with the LMITO for 2021/22 ($1,080) will provide $12 billion in tax relief when eligible taxpayers lodge their tax returns from 1 July 2022.

Stage 3 commences in the 2024/25 financial year, where around 95% of all individual taxpayers will face a marginal rate of 30% or less.  The tax rates will be as follows:

Taxable Income Tax % on excess
$18,200 Nil 19%
$45,000 $5,092 30%
$200,000 $51,592 45%