It’s easy to dismiss the buzz around the Federal Budget until it affects your pocket directly – and the modest income tax relief for low and middle-income earners does precisely that.
In news that sounds too good to be true Australian Treasurer Scott Morrison announced on Tuesday night that middle-income households in Australia “with both parents working on an average wage” will receive an increase to their tax refund or reduced tax bill in a lump sum of more than $1000 staring this coming financial year.
What, really?! How does that work?
Yes, really.
It’s part of a seven-year tax change plan including three main phases with benefits being seen as soon as this coming financial year.
In the first phase, taking place over four years, tax payers with incomes up to $125,000 will be eligible for the “Low and Middle Income Tax Offset” which is worth a lump sum of up to $530 a year – either in your tax refund or through a reduced tax bill.
The graph below breaks down what you’ll receive based on income.
Tax cuts based on your income
$530 in a lump sum is enough to go towards your car rego, or you could look at it as a weekly increase of $10.20 a week, the cost of one serving of avo on toast (sadly, that’s true) or a box of washing powder and some toilet paper.
A second tax change means that incomes between $41,000 and $200,000 will pay the same tax rate of 32.5 percent, even if they move to start earning a higher income.
“Under the Turnbull Government’s personal tax plan, most working Australians earning above $41,000 are likely to never face a higher marginal tax rate through their entire working life,” Mr Morrison said in his Budget speech.
Why are they giving us this money?
The Treasure said in his Tuesday night speech, “More tax is being recovered and we’re saying too much is coming in out of people’s pockets and they should get to keep it.”
The scheme is designed to encourage Aussies to upskill, seek more work and increase disposable incomes without the worry of increasing tax threshold.
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