Federal Budget tax cuts

Scott Morrison delivered the news that we’ve all been waiting for—tax cuts are on their way. Here are the details of when they will take effect and who they’ll benefit.

  • 5 June 2018

    On the evening of Tuesday 8 May 2018, Federal Treasurer Scott Morrison delivered the news that we’ve all been waiting for.

    Morrison announced tax cuts that will most benefit those on low and middle incomes. Although, in his own words, the concessions are modest—“what can be responsibly afforded while keeping the budget on track”—it is a welcome relief to many Australian families.

    Federal Treasurer Scott Morrison standing at a podium, speaking

    Federal Treasurer Scott Morrison.

    Now, of course, we all want to know the details: When will the tax cuts take effect? How much will they be? Who exactly will benefit?

    Let’s look at the fine print.

    When?

    The tax cuts, subject to legislative approval, are timed to be spread across multiple years from the financial year beginning 1 July 2018 to the financial year ending 30 June 2024.

    How much?

    This is the big question and it needs to be answered in stages.

    Low income earners

    From 1 July 2018 until 30 June 2022, tax payers in Australia with an annual taxable income of less than $90,000 will receive tax relief of up to $530 each year under the Low and Middle Income Tax Offset (LAMITO) scheme.

    This will work alongside the Low Income Tax Offset (LITO) that some low-income earners currently receive, and which will be increased after 30 June 2022 when the LAMITO ends.

    Tax brackets

    From 30 June 2022, the 19% tax bracket (currently $37,000) will be raised to $41,000.

    From 1 July 2018, the 32.5% marginal tax bracket (currently $87,000) will be raised to $90,000. After 30 June 2022, it will be increased again to $120,000, and after 30 June 2024, to $200,000.

    The aim is to reduce the number of marginal tax-rate thresholds and dispense with the 37% tax bracket by 30 June 2024.

    Blocks which spell out TAX, a calculator, pen and Australian money placed on a table

    Who?

    People on low to middle incomes will be the big winners over the coming years. Those currently benefiting from the LITO will maintain the tax offset—currently a maximum of $445. After 1 July 2022, the LITO will be increased to a maximum of $645.

    The proposed increase in the 19% and 32.5% tax brackets will enable those with low and middle incomes to earn more before being pushed into a higher tax bracket. This will allow them to keep more of what they have earned.

    The federal government is promoting the proposed changes as a sweeping tax overhaul aimed at benefiting Australians into the future. But these changes cannot be implemented until they have passed through parliament and into legislation.

    Still, for low and middle-income earners, they offer a glimmer of hope.

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