This is the tax, which will only be paid by big business, yet the government has provided rebates to compensate.
On 10 July 2011, the Australian Government announced changes to the personal income tax system as part of the plan for a clean energy future. The tax changes will reform the structure of the personal tax system, making it simpler and more transparent.
From 1 July 2012, the Government will deliver tax cuts to low and middle-income individuals by increasing the tax-free threshold and adjusting the first two marginal tax rates over two phases.
First, the tax-free threshold will rise from $6,000 to $18,200, and the maximum value of the Low-income tax offset (LITO) will be reduced from $1,500 to $445.
The first marginal tax rate will be increased from 15 per cent to 19 per cent, and will apply to that part of taxable income that exceeds $18,200 but does not exceed $37,000.
The second marginal tax rate will be increased from 30 per cent to 32.5 per cent, and will apply to that part of taxable income that exceeds $37,000 but does not exceed $80,000.
The following rates for 2012-13 apply from 1 July 2012.
From 1 July 2015, the tax-free threshold will rise from $18,200 to $19,400, and the LITO will be reduced from $445 to $300.
The second marginal tax rate will increase from 32.5 per cent to 33 per cent and will apply to that part of taxable income that exceeds $37,000 but does not exceed $80,000.
The following rates for 2015-16 apply from 1 July 2015.
In real terms what does this mean for the average person?
Below is a table of how these changes will affect people with incomes of $37,000pa, $50,000pa, $80,000pa and $100,000pa.
As you can see from the above table, for the average Australian there will be little of no benefits from the increase in the tax free threshold, this is mainly due to the decrease in the Low Income Rebate and the increase in the tax rate between $37,000 and $80,000 (being increased by 3% over time).
The people who benefit from this will be low-income workers including casual, part time workers, students and people on government’s benefits.
Middle Australia will pay people whose income is between $50,000 to $100,000 and self-funded retirees will not benefit from the tax savings but will pay for the price increases from the carbon tax.
For more information please contact us on 07 4771 4577.
Subscribe to Grow Your Wealth the FREE weekly financial newsletter.
PS. By the way, Julia Gillard is paid around $470,000, although she will not benefit from these tax cuts her income is so high that she falls into the elite class of people who will not notice the increase cost of living the carbon tax will bring. Lucky her!