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Federal Budget 2020: Measures for Individuals

Federal Budget 2020: Measures for Individuals

Here are some of the Budget measures that will affect individuals.

Low and middle-income earners – tax cuts

As widely anticipated, the government will bring forward to the current tax year (2020–21) the tax cuts scheduled to apply for 2022–23 and 2023–24 (Stage 2 tax cuts). Those rates will therefore apply for 2020–21, 2021–22, 2022–23 and 2023–24.

Income tax rates from 2020–21 to 2023–24 — residents

Taxable income

Tax rate

Up to $18,200 Nil
$18,201–$45,000 19%
$45,001–$120,000 32.5%
$120,001–$180,000 37%
$180,001 and over 45%

 

The legislated 2022–23 and 2023–24 rates for non-residents and working holiday makers will also be brought forward to 2020–21.

The legislated rates to apply from 2024–25 under the Stage 3 tax cuts are unchanged.

Income tax rates from 2024–25 — residents

Taxable income

Tax rate

Up to $18,200 Nil
$18,201–$45,000 19%
$45,001–$200,000 30%
$200,001 and over 45%

 

Low income tax offset

As a consequence of bringing forward the Stage 2 tax cuts due to start in 2022–23, the new low income tax offset (LITO) will apply from the current tax year (2020–21), replacing the existing LITO.

The maximum amount of the new LITO will be $700, payable for taxable incomes up to $37,500. No LITO will be payable once taxable income reaches $66,667.

Taxable income

Amount of LITO 

$0–$37,500 $700
$37,501–$45,000 $700, less 5% of the excess
$45,001–$66,667 $325, less 1.5% of the excess

 

Low and middle income offset retained for one year

The low and middle income tax offset (LMITO) was legislated to cease from 2022–23 when the new LITO was going to be introduced. Although the new LITO has been brought forward to the current tax year, LMITO has not been scrapped – and will still apply for 2020–21 (but not beyond).

Taxable income

Amount of LMITO 

$0–$37,000 $255
$37,001 – $48,000 $255, plus 7.5% of the excess
$48,001 – $90,000 $1,080
$90,001 – 126,000 $1,080, less 3% of the excess
$126,001 + Nil

 

Summary of individual income tax rates — residents

 To 30 June 2018

STAGE 1
From 1 July 2018

(Legislated)

STAGE 2
From 1 July 2020

(Bill awaits Royal Assent)

STAGE 3
From 1 July 2024

(Legislated)

Income threshold Tax rate Income threshold Tax rate Income threshold Tax rate Income threshold Tax rate
$18,200 19% $18,200 19% $18,200 19% $18,200 19%
$37,000 32.5% $37,000 32.5% $45,000 32.5% $45,000 30%
$87,000 37% $90,000 37% $120,000 37% $200,000 45%
$180,000 45% $180,000 45% $180,000

45%

 

Stimulus payments

The Government will provide two separate $250 economic support payments to eligible recipients of the following payments:

  • Age Pension;
  • Disability Support Pension;
  • Carer Payment;
  • Family Tax Benefit, including Double Orphan Pension (not in receipt of a primary income support payment); and
  • Carer Allowance (not in receipt of a primary income support payment).

 

Pensioner Concession Card (PCC) holders (not in receipt of a primary income support payment), Commonwealth Seniors Health Card holders and eligible Veterans’ Affairs payment recipients and concession card holders will also receive the payments.

The first payment will be made from November 2020 and the second from early 2021.

The $250 cash payments are tax exempt and will not count as income support for social security purposes.

CGT exemption for granny flats

The Government will put in place a “targeted” CGT exemption for “granny flat” arrangements.

CGT will not apply to the creation, variation or termination of arrangements that provide accommodation for “older Australians or people with disabilities”.

The exemption will only apply to agreements that are entered into because of “family relationships or other personal ties” and will not apply to commercial rental arrangements.

The measure is proposed to commence from 1 July 2021.

Paid Parental Leave (PPL)

The PPL work test period will be temporarily extended in response to the COVID-19 pandemic.

Under normal circumstances, parents must have worked 10 of the 13 months prior to the birth or adoption of their child to qualify for PPL (and for Dad and Partner Pay). The work test period is to be temporarily extended to 10 out of 20 months for births and adoptions that occur between 22 March 2020 and 31 March 2021.

This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek tax advice from our accountants at KMT Partners. Information is current at the date of issue and may change.

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