Personal income tax cuts
| Date of effect | 1 July 2020 |
More than 11 million taxpayers will get a tax cut backdated to 1 July this year.”
Treasurer the Hon Josh Frydenberg, Budget Speech 2020-21
As widely predicted, the Government has brought forward stage 2 of its planned income tax cuts by two years. Originally intended to apply from 1 July 2022, the tax cuts will come into effect from 1 July 2020 (subject to the passage of the legislation).
At a cost of $17.8 billion over the forward estimates, bringing forward the tax cuts is a controversial move. The Government argues that the measure will “boost GDP by around $3.5 billion in 2020-21 and $9 billion in 2021-22 and will create an additional 50,000 jobs by the end of 2021-22.” Others in Parliament believe the measure rewards higher income earners and the money could be better spent elsewhere. The Senate will decide whether the Government’s plan comes to fruition.
Stage 3 of the Personal Income Tax Plan that simplifies and flattens the personal income system remains scheduled for 2024-25.
| Tax thresholds | |||
| Tax rate | Current | From 1 July 2020 | From 1 July 2024 |
| 0% | $0 – $18,200 | $0 – $18,200 | $0 – $18,200 |
| 19% | $18,201 – $37,000 | $18,201 – $45,000 | $18,201 – $45,000 |
| 30% | $45,001 – $200,000 | ||
| 32.5% | $37,001 – $90,000 | $45,001 – $120,000 | |
| 37% | $90,001 – $180,000 | $120,001 – $180,000 | – |
| 45% | >$180,000 | >$180,000 | >$200,000 |
| LITO | Up to $445 | Up to $700 | Up to $700 |
Bringing forward the personal income tax plan will:
- Increase the top threshold of the 19% tax bracket to $45,000 (from $37,000)
- Increase the top threshold of the 32.5% tax bracket to $120,000 (from $90,000)
- Increase the low income tax offset from $445 to $700
In addition, the LMITO (low and middle income tax offset), which provides a reduction in tax of up to $1,080 for individuals with a taxable income of up to $126,000, will be retained for 2020-21. This measure was to be removed at the commencement of stage 2 of the reforms from 2022-23.
Tax relief to back hard-working Australians and to create more jobs
$250 economic support payments
| Date of effect | November 2020 and early 2021 |
Two additional economic support payments of $250 each will be made to eligible recipients of the following payments and health care card holders:
- Age Pension
- Disability Support Pension
- Carer Payment
- Family Tax Benefit, including Double Orphan Pension (not in receipt of a primary income support payment)
- 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
- Eligible Veterans’ Affairs payment recipients and concession card holders.
The payments are exempt from taxation and will not count as income support for the purposes of any income support payment.
Capital gains tax removed from ‘granny flats’
| Date of effect | 1 July 2021 subject to the passage of the legislation |
At present, if you enter into a formal granny flat arrangement with a relative, such as an elderly parent, there is a risk of capital gains tax (CGT) applying.
Announced pre Budget, this measure provides a targeted CGT exemption for granny flats under certain conditions. Under the arrangement, CGT will not apply to the creation, variation or termination of a formal written granny flat arrangement providing accommodation for older Australians or people with disabilities.
The exemption only applies to family arrangements or other personal ties and will not apply to commercial rental arrangements.
Removing Capital Gains Tax for Granny Flats
10,000 additional places in First Home Loan Deposit Scheme
| Date of effect | 6 October 2020 |
Announced pre Budget, from 6 October 2020 until 30 June 2021, an additional 10,000 places will be available for first home buyers under the First Home Loan Deposit Scheme to support the purchase of a new home or a newly built home. The scheme enables first home buyers to purchase a home with a deposit of as little as 5% without mortgage insurance. There are currently 27 participating lenders across Australia offering places under the First Home Loan Deposit Scheme.
Helping an additional 10,000 first home buyers
Aged care support
$1.6bn to help elderly stay at home
As previously announced, the Government has committed to a broad package of aged care funding predominantly focussed on helping older Australians remain at home. $1.6 billion has been provided over four years from 2020-21 to release an additional 23,000 home care packages across all package levels.
The number of home care packages will have increased threefold from around 60,300 in 2013 to around 185,500 in 2021.
Aged care industry monitoring and support
An additional $400 million will see an injection in cash for infrastructure supporting the aged care industry including a new serious incident response scheme and monitoring services.
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