As a measure to get Australia through the effects of Covid, the 2020 Federal Budget brought forward (by 2 years) various tax cuts for taxpayers. These cuts take effect from 1 July 2020. So, if your business has employees or you’re an employee, then you can expect an increase in your take home pay now.
From 1 July 2020, the following tax rates will apply:
- an increase in the top income threshold of the 19 per cent tax bracket from $37,000 to $45,000;
- an increase in the top income threshold of the 32.5 per cent tax bracket from $90,000 to $120,000;
- an increase in the Low Income Tax Offset (LITO) from $445 to $700.
Newly legislated personal tax rates — 1 July 2020 to 30 June 2022
Let’s say you earn $43,000 gross per year. Under the old tax rules, the tax payable (ignoring Medicare Levy and LITO) would be $5,522. Under the new tax rates, the tax payable would be $4,712. That’s a tax saving of $810 over the year. On the other hand, let’s say you earn $165,000. Under the old tax rates, the tax payable would be $48,547. Under the new tax rates the tax payable would be $46,117. A tax saving of $2,430 for the year.
If you’re an employer, you’ll need to ensure your payroll tax rates are up to date in your software.
You’ll also need to adjust any bank automatic direct debits for your staff’s wages.
If you need any assistance with any of the above, please contact our office.