Commonwealth Budget 2012-2013 -Key points on Taxation

Key points on Taxation

Reductions in Personal Income Tax

Effective from 1 July 2012

The Government has confirmed previously announced changes to the personal income tax rates and Low Income Tax Offset (LITO) to apply from 1 July 2012. These changes are aimed at delivering tax cuts to the low and middle income earners, ensuring assistance is received for the impact the carbon price will have on the cost of living. These changes have already been legislated.

Tax rates and thresholds for this and the next financial year are shown below:

Personal income tax rates
2011/12			2012/13
Income Threshold $	Marginal rate*	Tax on this income*	Income Threshold $	Marginal rate*	Tax on this income*
Up to 6,000	Nil	Nil	Up to 18,200	Nil	Nil
6,001 – 37,000	15%	15c for each $1 over $6,000	18,201 – 37,000	19%	19c for each $1 over $18,200
37,001 – 80,000	30%	$4,650 plus 30c for each $1 over $37,000	37,001 – 80,000	32.5%	$3,572 plus 32.5c for each $1 over $37,000
80,001 – 180,000	37%	$17,550 plus 37c for each $1 over $80,000	80,001 – 180,000	37%	$17,547 plus 37c for each $1 over $80,000
180,001+	45%	$54,550 plus 45c for each $1 over $180,000	180,001+	45%	$54,547 plus 45c for each $1 over $180,000

* These rates apply to Australia residents for taxation purposes and do not include the Medicare Levy of 1.5%.

LITO will decrease from $1,500 to $445 for 2012/13, phasing out after $37,000 by 1.5 cents in the dollar to a maximum of $66,667 as per the below table. The impact of these changes are that the effective tax-free threshold will increase from $16,000 to $20,542 in 2012/13.

Additional changes will also come into effect from 1 July 2015 as follows:

• The tax-free threshold will increase to $19,400

• Marginal tax rate of between $37,001 and $80,000 will increase to 33% (or $3,344 plus 33c for each $1 over $37,000)

• The Low Income Tax Offset will further decrease to $300 with a phase out rate of 1% and an upper limit of $67,000.

The graphs below show the reduction in tax payable for the 2012/13 financial year as compared to the 2011/12 financial year for a range of taxable incomes.