Millions of taxpayers stand to save hundreds of dollars on their tax bill this year after the federal budget boosted a tax offset first introduced in 2018.
Available for workers earning up to $126,000 a year, the low-and-middle-income tax offset was doubled to a maximum of $1080 in 2019 under the first stage of the government’s three-stage tax plan.
And on Tuesday evening, the government revealed it would boost the offset by a further $420 this year, before scrapping the entire offset in 2022-2023.
Single people who earn less than $126,000 will now save up to $1500 on their taxes, while couples will save up to $3000.
The government estimates the measure will cost $4.1 billion in lost tax receipts.
Reliable Melbourne Accountants director Tushar Khanna said the offset will help a lot of people cope with the rising cost of living.
Mr Khanna said whether you are eligible for the full $1500 offset depends on your taxable income – as the above table shows.
If you earn $37,000 or less, your tax bill will be reduced by a maximum of $675.
If you earn between $48,000 and $90,000, you will receive the full $1500.
And if you earn above that amount, the amount you receive will fall by three cents for every dollar earned above $90,000 – until it reaches $420 for people on $126,000 a year.
How it works
Taxpayers do not need to apply for the offset.
If you are eligible to receive it, the offset will automatically be deducted from your tax bill when you file your tax return at the end of the financial year.
The current financial year finishes on June 30, 2022.
But taxpayers are typically advised to delay submitting their tax returns until at least the end of July, as this gives the ATO enough time to source third-party data from employers, banks, government agencies and superannuation funds. (You can read more about this here.)
Taxpayers eligible to receive the offset will cop a tax hike of up to $1500 next year when the offset comes to an end.