Now that the 2018 budget media frenzy has died down, most of us just want to know: how do the new tax cuts affect me?
We’ve put together an easy reference list of budget changes, tailored to you.
A handy personal income tax refund boost
An effective tax cut for millions of Australian is the biggest change in the Federal Budget. If your income is lower than $37,000, you’ll see a $200 reduction in your tax bill. For those earning between $37,000 and $48,000, the $200 increases incrementally up to $530. Then, the maximum offset of $530 applies for incomes between $48,000 and $90,000.
This change benefits around 10 million taxpayers, with around 4 million of that number getting the full reduction of $530 a year.
When do the 2018 budget tax cuts start?
Your tax reduction won’t fall from your next pay packet. Instead, when you do your taxes in July, the reduction will be in a lump sum in your tax return. In other words, if you’re eligible, your tax refund will increase by up to $530. If you have a tax bill, it will be up to $530 lower.
Your tax bracket might change
In Australia, income is grouped into five “brackets” that are taxed at progressively higher rates as income goes up. The higher your income, the higher rate of tax you pay.
This budget wants to simplify things by removing one bracket and increasing the income thresholds for the others.
These changes won’t happen immediately though. The final changes are scheduled for 2023-24.
High income earners to win in the long term
While the initial changes to the Low-Income Tax Offset are directed at low-middle income earners – the long term changes will largely benefit upper-middle and high income earners.
Here’s a comparison:
A social worker who earns $52,000 per year will be $530 better off in 2019. Then in 2023 and 2015 they’ll be $540 better off.
A surgeon on $210,000 per year will be only $135 better off in 2019. However in 2023 they’ll be $2,025 better off and by 2025 they’ll be a whopping $7,225 better off!
This ABC article has a great tool which allows you to compare different occupations. (Hint: It’s the highest income earners who’ll benefit most in the long term).
Warning – you’ll be under more ATO scrutiny than ever…
While there are some generous tax cuts in the budget, there’s also some serious extra funding for the ATO.
That means more resources for conducting audits and investigations. It’s therefore very important that you get the advice of a Tax Agent like Etax if you’re unsure about any of the claims you’re making in this year’s tax return. Remember, don’t be afraid of the ATO at tax time – just ask for help if you’re not sure!
More for uni students
Youth Allowance, the government’s main form of support for students, will be a little more generous. From 1 January 2019, the parental income test increases by $10,000. That means parents can earn a combined income of $160,000 before their children are ineligible for Youth Allowance.
Increase to pensioner work bonus
Pensioners who choose to have a small-scale job on the side will soon be able to earn more. The Pension Work Bonus increases and pensioners can earn an extra $1300 a year from work without losing Government payments as a result.
For older Australians who want to age at home instead of an aged care facility, there is significant additional funding available to allow for 74,000 home care spaces by 2021.
More help for small business owners
The incredibly popular $20,000 instant asset write off will continue for another year. This program allows small business owners to immediately deduct the full cost of an asset purchased for their business if it is less than $20,000.
The other big change is that the Government will make cash payments of over $10,000 illegal from 01 July 2019. This cracks down on dodgy businesses that pay in cash to avoid tax obligations.
A $10,000 wage subsidy to combat age discrimination is also available to employers who employ older Australians.
And finally: good news for beer drinkers!
A fun one to finish. Craft beer has exploded in recent years, with dozens of new small brewers emerging in every city. But craft brewers use smaller kegs which are hit with higher taxes. No longer! Craft brews will be taxed at the same lower rate as large scale brewers. A win for the little guys!