After weeks of debate in the Australian parliament and some last-minute Senate negotiations, the Coalition has passed its seven-year income tax plan!
The overall package will cost the treasury $144 billion in lost revenue over the next 10 years, with the money flowing back into the hands of workers.
So when will you see the money in your bank account? It depends on what you earn … and who wins the next election.
So, how much will I get back and when? The tax cuts will come in three stages, but only one of them is guaranteed.
From 1 July this year, those earning up to $125,000 a year will benefit from the Low and Middle Income Tax Offset.
They won’t notice the money right away because it will come in the form of a “refund” at the end of the financial year (July 2019) when they file their tax return.
Around 4.4 million Australians will get the maximum refund of $530 – those who earn between $48k and $90k.
The ceiling on the tax bracket that currently ends at $87k will rise to $90k, meaning more dollars will be taxed at 33 per cent. This benefits higher earners too, as they will pay less tax on that part of their salary (that’s how marginal tax rates work).
These 2018 cuts were supported by nearly everyone in parliament – including Labor and the whole Senate crossbench. And yes, Labor has promised to double the cut for these taxpayers if it wins the next election.
They say they can afford that because they don’t support the later cuts and they would cut down on other concessions like negative gearing and capital gains tax discounts.
That’s right, the government’s plan four years from now is to fix the phenomenon where workers find themselves drifting into higher tax brackets through inflation, even though their cost of living is rising at the same time.