4 tax benefits from the Budget 2020
This budget is all about bringing forward measures already approved and legislated originally to commence on 1st July 2022
Personal income Tax reduction is one of those changes that will be applied retrospectively from 1 July 2020
You are eligible if you are:
- 19% MTR – threshold upper limit has been extended from $37,000 up to $45,000 – good news for your disposable income, but some people will miss out on Low-income superannuation tax-offset – please listen on, as I will explain this feature when talking about the budget & superannuation
- 32.5% tax bracket has been extended now from $90K up to $120K
- Total maximum tax Savings available is for income of $120K = $2,430 (or approx. $50.00pw) and does not increase above that income level
More disposable income due to tax cuts – My recommendation is – try to save this extra money if you can. If you are ok on your current budget, this is the money you haven’t had, so you will not miss it, but with time it will grow to a significant saving balance for you. You could salary sacrifice (my video), maybe spouse contributions, maybe non-concessional contributions, or even outside of super – all depends on your situation, but it creates ability to save extra.
Stage 3 of tax cuts – already legislated to be introduced on 1st July 2024
- We are going to have only 3 tax rates 19%, 30%, 45% – 37% is completely gone
- 95% of tax payers up to 30% tax rate
The gov is also bringing forward the increase of Low-Income Tax Offset
- Currently at $445
- Is increasing to $700
- Brought forward to current financial year, rather than in 2022
Low- and Middle-Income Tax Offset is unchanged for 2020-21
Was supposed to be phased out, as recommended tax cuts would replace LMITO
But decided to keep it for 2020-21
If you want to see the tax relief benefit for your income level, check this gov estimator – www.Budget.gov.au
I reviewed the side, please be aware that it actually shows your tax savings by comparing to the tax system from 2017-18, this is when Scot Morrison first started as a Prime Minister and stage 1 of tax cuts was introduced, to show your figures better than they really when comparing to current year.
tax benefits of the budget:
1. you will enjoy tax cuts 2 years earlier than originally planned & actually 95% Australians will benefit from those tax cuts during this difficult covid time
2. Tax cuts will introduce additional money in your pocket of up to $2,430p.a depending on the level of your taxable income
3. If you are on lower income, the Low-Income Tax Offset has also been brought forward and increased to $700
4. The Low- and middle-income tax offset is also remaining and available for the tax year 2020-21
Bottom line is that most Australian families will have more disposable income from this financial year, rather than waiting 2 extra years.
Negatives of the budget:
1. Unfortunately, not enough financial support or relief for low income earners
2. Calculator is a bit misleading as not comparing with current situation
If you would like to read about the Budget’s impact on PENSION & AGED CARE – click here
If you would like to read about the Budget’s changes to SUPERANNUATION – click here
