Personal Tax Rates
A seven-year Personal Income Tax Plan will be implemented in three steps:
- introducing a low and middle income tax offset
- providing relief from bracket creep
- removing the 37% personal income tax bracket.
Step 1: Low and middle income tax offset (LMITO)
A LMITO will be introduced as a non-refundable tax offset of up to $530 to resident low and middle income taxpayers from 2018/19 to 2021/22.
The LMITO will provide a benefit of up to $200 for taxpayers with taxable income of $37,000 or less. For taxable incomes between $37,000 and $48,000, the value of the offset will increase at a rate of three cents per dollar to the maximum benefit of $530.
Taxpayers with taxable incomes from $48,000 to $90,000 will be eligible for the maximum benefit of $530.
For taxpayers with taxable incomes from $90,001 to $125,333, the offset will phase out at a rate of 1.5 cents per dollar.
The LMITO will be received as a lump sum on assessment after an individual lodges their tax return. The benefit of the LMITO is in addition to the existing low income tax offset.
Step 2: Relief from bracket creep for middle income taxpayers
From 1 July 2018, the top threshold of the 32.5% personal income tax bracket will be increased from $87,000 to $90,000.
From 1 July 2022, the low income tax offset will be increased from $445 to $645. The increased low income tax offset will be withdrawn at a rate of 6.5 cents per dollar for incomes between $37,000 and $41,000, and at a rate of 1.5 cents per dollar for incomes between $41,000 and $66,667.
From 1 July 2022, the 19% personal income tax bracket will be increased from $37,000 to $41,000. The top threshold of the 32.5% personal income tax bracket will be further increased from $90,000 to $120,000.
Step 3: Removing the 37% personal income tax bracket from 1 July 2024
The 37% tax bracket will be removed, and the income level for the 45% tax bracket increased, with effect from 1 July 2024.
|Rate||Thresholds in 2017/18||New Thresholds in 2024/25|
|Nil||Up to $18,200||Up to $18,200|
|19%||$18,201 – $37,000||$18,201 – $41,000|
|32.5%||$37,001 – $87,000||$41,001 – $200,000|
|37%||$87,001 – $180,000||–|
|45%||Above $180,000||Above $200,000|
The 2017/18 Federal Budget measure to increase the Medicare levy from 2% to 2.5% of taxable income from 1 July 2019 will not proceed.
The Medicare levy low-income thresholds for singles, families, seniors and pensioners will be increased from the 2017/18 income year.
Taxation of income for an individual’s fame or image
From 1 July 2019 high profile individuals (such as sports stars and actors) will no longer able to take advantage of lower tax rates by licencing their fame or image to another entity. This measure will ensure that all remuneration from the commercial exploitation of that image will be assessed to that individual.