There’s nothing a Coalition government loves more than bleating on about tax cuts for “hard-working Australians”. The 2021 Budget is no different, with tax being a big part of Treasurer Josh Frydenberg’s sell to the public.
There’s a lot about ‘Stage 2’ tax cuts, a bit about the upcoming ‘Stage 3’ tax cuts, and a nice-sounding $1,080 in your pocket, but of course, things aren’t always as clear as they seem. Let’s dive in.
What are the Stage 2 and Stage 3 tax cuts?
It’s part of the Coalition government’s long-term plan to wind back tax rates. Last year, in response to the COVID-19 Pandemic, the government ‘brought forward’ Stage 2 of its tax cuts, which increased the threshold for the 19% tax rate to $45,000, and the threshold for the 32.5% tax rate to $120,000.
Stage 3 is expected to come into effect in 2024-25, when the 32.5% threshold will increase again to $200,000. (Any rich kent who earns more than $200,001 per year will be in the top tax bracket of 45%.)
When Stage 3 hits, it’s expected that 95% of taxpayers will have a marginal tax rate of 30%.
Okay. What is this $1,080 in tax cuts all about then?
The government has extended its low and middle income tax offset (LMITO) by another year, which is where the tax cut of $1,080 comes in.
Around 10.2 million people are expected to benefit when tax time comes around next year (2021-22), with individuals set to $1,080 and dual income couples up to $2,160.
This will primarily impact anyone earning between $48,000 and $90,000 per year.
And most importantly, how do I get the tax cuts?
Literally by filing your tax return. That’s it! Here’s what the Australian Tax Office said about it last year:
“You don’t need to complete anything in your tax return in order for us to work out your low or low and middle income tax offset. We work out the amount of this tax offset for you once you lodge your tax return.”
Less work for me, the person who always leaves her taxes till the last minute? Fab.
Want our full Budget breakdown? Head right this way.