The Budget’s tax cuts have officially passed the Senate, meaning Australians will soon be seeing heavier pay packets.
Also read: Federal Budget 2020: What it means for you
The Senate passed the Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020 on Friday with no amendments, shortly after it was introduced in Parliament on Wednesday.
The tax cuts reflect a change in the planned tax cut schedule, meaning cuts planned for July 2022 will now come into place immediately and be backdated to 1 July 2020.
Around 11.6 million Australians are expected to see some benefit, with the 19 per cent tax threshold increasing from $41,000 to $45,000 and the 32.5 per cent threshold climbing from $90,000 to $120,000.
Additionally, the low- and middle-income tax offset is being increased for one year.
Here’s a breakdown of how it will work for you:
If you earn up to $40,000, you’ll save up to $1,060
If you earn more than $40,000, up to $80,000, you’ll save up to $$2,160
If you earn more than $80,000, up to $100,000, you’ll save up to $2,445
If you earn more than $100,000, up to $120,000, you’ll save up to $2,745
If you earn more than $120,000, up to $200,000, you’ll save up to $2,565
“What we've legislated today is income tax relief for hardworking Australians, putting more money into workers' pockets, but also, of course, stimulating the economy by boosting aggregate demand. That will help to maximise the strength of the recovery sooner,” Finance Minister Mathias Cormann said.
Commenting on the successful passage of the tax cut bill, the Australian Tax Office (ATO) said it will update the tax withholding schedules and the new tax brackets will be ready next week to be published on its website.
What happens next?
Employers will then need to adjust their payroll processes and systems so that their employees’ take home pay matches up with their new tax bracket.
“The complexity of implementing these adjustments may be different for each employer,” the ATO added.
“This means that some people may notice the tax cuts reflected in their take home pay within a few days or weeks, while for others it may be longer.”
The excess tax workers paid between 1 July and now will be included in their tax assessment at the end of the 2020 financial year.
“The adjustments to the withholding schedules are designed to ensure that taxpayers have the correct amount of tax withheld from their pay going forward,” the ATO said.
“It is not possible for the ATO to determine the extent of ‘over-withholding’ that may have occurred for each and every taxpayer as this is highly dependent on individual circumstances and will be different for everyone.”
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