Confused about the tax cuts?ATO low & middle income tax offset changes
Confused about the tax cuts?
The Low & Middle Income Tax Offset, or tax cuts as they are commonly known as that were announced in the 2019 – 2020 budget have now been passed through Parliament. This is great for low to middle income earners. This will save you being confused about the tax cuts.
So in simple terms (although nothing with tax is simple!!) …….. the tax cuts you will be entitled to is dependent on your annual earnings. This means that unfortunately not everybody will necessarily receive a lump sum of $1080! Everybody’s situation is different and this is a quick breakdown of what it might mean for you.
If you earn:
- up to $37,000 you will receive a low and middle income tax offset of up to $255
- between $37,000 – $48,000 you will receive $255 plus an amount equal to 7.5% to the maximum offset of $1080
- taxpayers with a taxable income between $48,000 – $90,000 will be eligible for the maximum low & middle income tax offset of $1080
- taxpayers earning between $90,000 – $126,000 will receive up to $1080 in tax relief less an amount equal to 3% of the excess
- taxpayers earning over $126,000 will receive $135 in tax relief
So if you are still confused about the tax cuts this is how it works. Depending on your taxable income these tax cuts or tax offset amounts are added to your regular refund. At this stage, this tax relief will apply for the next 4 years.
These tax cuts should not be confused with your tax return. The tax cuts reduce the amount of tax you pay on your annual income. A tax return is what you get if you overpaid your tax throughout the year – usually because you used PAYG. For example, if you were supposed to pay $6,000 in tax but you were taxed $8,000 you will get $2,000 back.
Please keep in mind that other factors can also affect your return and potential refund. For example, we need to take into account any deductions you can claim which are applicable to your occupation, the amount of tax your employer has taken out through the year or the Medicare levy can have an impact. So you can see that there are a number of things we need to consider to give you an accurate picture.
If you have already lodged your 2019 Tax Return, don’t worry as the ATO will automatically amend your assessment if your offset is due to increase however if you’re still confused and need some help to maximise your refund, come in and see us and we’ll handle your tax return for you.
To get a quick estimate of your tax relief click on the ATO link below and use the slide button to show your taxable income.
– Dean Kennedy