Calculate how new tax changes will affect you

 

A $7 billion blast of cash will be immediately fired into the economy via sped-up income tax cuts and extra rebates for 11 million Australians.

The biggest savings, in dollar terms, go to middle and higher double-income households who will have their combined tax bill slashed by nearly $5000 in 2020-21 - two years earlier than originally planned.

For lower income earners, tax "offsets" will be increased or extended, which, when added to a reduced Medicare liability, deliver a saving of $2400 for a person earning $60,000.

Treasurer Josh Frydenberg aims to get households to spend their own money. Picture: NCA NewsWire/Gary Ramage
Treasurer Josh Frydenberg aims to get households to spend their own money. Picture: NCA NewsWire/Gary Ramage

Aged pensioners will get two $250 payments, one in December and another in March, at a cost of $2.6 billion.

Treasurer Josh Frydenberg's aim is to get households to spend and thereby support businesses into firstly conserving - then creating - jobs.

"Australians will have more of their own money to spend on what matters to them," Mr Frydenberg said.

"It will help local businesses to keep their doors open and hire more staff."

The Department of Treasury expects the cuts will boost the economy by $3.5 billion in 2020-21 and $9 billion next financial year, leading to 50,000 new jobs.

Under the tax changes, income between $90,000 and $120,000 will be taxed at 32.5 per cent instead of 37 per cent.

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That will reduce this financial year's tax bill for a worker on $120,000 by $1350.

People on less than $37,000 will get a larger "low income tax offset" of $700, increased from $445.

Workers earning above that amount up to $45,000 will benefit from a $1080 saving through the raising of the 19 per cent tax threshold, meaning they avoid the 32.5 per cent rate.

Beyond this income, up to $90,000, the tax offset delivers the same benefit - for this financial year only.

Over this level, to $126,000, tax cuts and a reducing offset put as much as $2460 back in workers' pockets.

There are similar savings above this level, through the tax cuts.

 

 

The tables/calculator accompanying this story allow you to determine your household's savings this financial year compared to 2019-20.

The figures produced by News Corp Australia are in most cases smaller than that published by the government.

This is because the numbers here are a comparison to last financial year.

Treasury's calculations are a comparison to 2017-18 when most tax burdens were higher.

The numbers you see have been prepared independently by PwC Australia chief economist Jeremy Thorpe, a former Treasury economist.

Mr Thorpe said the stimulus to date has focused on supporting the unemployed or those who would have otherwise been unemployed.

News Corp Australia is helping you calculate your household’s savings.
News Corp Australia is helping you calculate your household’s savings.

"But with these tax cuts, the government is now pivoting to encourage those still in work to spend," he said.

The government will introduce new legislation to bring forward the tax cut timetable.

Prior to the Budget's release, Labor had not committed to supporting the rumoured acceleration of the 2022 tax cuts.

However it did not oppose the reductions when they were first legislated, as part of a broader three-stage package.

The cuts brought forward in this Budget are stage two. The total cost of accelerating their introduction is $17.8 billion over four years.

The final stage is slated for 2024-25 and involves axing the 37 per cent tax rate. The 32.5 per cent rate will apply from $45,000 to $200,000.

Originally published as Calculate how new tax changes will affect you

 

 

 

 

 

 

 

 



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