Federal Budget Summary – Personal Income Tax Changes
Low and Middle Income Tax Offset (LMITO)
The LMITO will remain for one more income year, ending on 30 June 2022. Touted in the media as a “tax cut”, the LMITO is actually already in place for 2021 and was also in place for 2020.
Not everyone will get the full $1,080 offset. It is proposed to reduce your tax bill as follows:
| Income Level | Amount of Offset |
|---|---|
| $37,000 or less | Up to $255 |
| $37,001 to $48,000 | $255 plus 7.5% of excess over $37,000 |
| $48,001 to $90,000 | $1,080 |
| $90,001 to $126,000 | $1,080 less 3% of excess over $90,000 |
| $126,001 or above | Nil |
The tax offset is non-refundable so will reduce your tax payable when your return is lodged.
Increasing Medicare Levy low-income thresholds
Thresholds to increase this year (2021) as follows:
- Singles threshold will increase from $22,801 to $23,226
- Family threshold will increase from $38,474 to $39,167
- Single seniors and pensioners threshold will increase from $36,056 to $36,705
- Family seniors and pensioners threshold will increase from $50,191 to $51,094
For each dependent child or student, the family income thresholds increase by a further $3,597 (up from $3,533)
Other changes affecting individuals
The following changes are all anticipated to apply from 1 July 2022:
- Tax residency – the rules will be modernised and made simpler.
- Self-education deductions – removal of the exclusion of the first $250.
- Employee share schemes – removal of ‘cessation of employment’ as a taxing point.
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances
