Personal tax reform
For the fifth year in a row, the government has provided personal tax relief through changes to the thresholds at which individual marginal tax rates change. Although not as significant as in past years, the changes will be phased in over two years as detailed in the table below.
In addition to these income tax rate changes, the low income tax offset has been extended for the second year in a row. From 1 July, the amount of the offset will increase from $600 to $750. You will get the full offset if your taxable income is below $30,000 (currently $25,000) and some benefit up to $48,750.
| Tax rate | Income ranges | ||
|---|---|---|---|
| Current for 2006-07 | Proposed for 2007-08 | Proposed from 2008-09 | |
| 0% | $0 - $6,000 | $0 - $6,000 | $0 - $6,000 |
| 15% | $6,001 - $25,000 | $6,001 - $30,000 | $6,001 - $30,000 |
| 30% | $25,001 - $75,000 | $30,001 - $75,000 | $30,001 - $80,000 |
| 40% | $75001 - $150,000 | $75,001 - $150,000 | $80,001 - $180,000 |
| 45% | $150,001 + | $150,001 + | $180,001 + |
The impact of the increased low income tax offset is that the effective tax free threshold will increase as of 1 July 2007 from $10,000 to $11,000.
These changes will benefit most Australians on different income levels, as shown in the following table and chart (excluding Medicare levy and any tax offset entitlements - for tax offset changes see later comments), although for 2007-08 the benefits will be enjoyed mostly by people earning less than $30,000.
Income tax payable at selected taxable income levels (ignoring Medicare levy and tax offsets)
| Taxable income | Current tax (2006-07) |
Proposed tax (2007-08) |
Proposed tax (2008-09) |
|---|---|---|---|
| $25,000 | $2,850 | $2,850 | $2,850 |
| $30,000 | $4,350 | $3,600 | $3,600 |
| $75,000 | $17,850 | $17,100 | $17,100 |
| $80,000 | $19,850 | $19,100 | $18,600 |
| $150,000 | $47,850 | $47,100 | $46,600 |
| $180,000 | $61,350 | $60,600 | $58,600 |
Tax savings per annum at selected taxable income levels (after allowing for Medicare levy and low income tax offset entitlements)
For qualifying senior Australians (generally over age 65), the changes to the personal income tax thresholds from 1 July 2007 will mean that a single senior Australian will not have an income tax liability unless their taxable income exceeds $25,867 (currently $24,867). For couples, this limit is $43,360 of combined taxable income (currently $41,360).
Changes will also be made to Medicare levy thresholds to ensure you do not pay the Medicare levy until your taxable income exceeds these new ‘tax-free thresholds’.
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