Australia is currently amidst a debate about tax changes. We’d like to clarify what’s happening in case you’re not clear.
As it stands at the moment, under the current tax legislation, there will be changes to the tax rates from the 1st of July 2024. If no changes to the legislation happen, the rates will be as follows (ignoring Medicare):
|
Thresholds ($) |
Rates (%) |
|
0-18,200 |
0 |
|
18,201-45,000 |
19 |
|
45,001-200,000 |
30 |
|
Over $200,000 |
45 |
These changes are substantial for the current tax paid for income above $45,000. It increases the top threshold from $180,000 to $200,000 and creates a flat tax rate of 30% between $45,000 to $200,000. Currently, there are two thresholds above the $45,000 income with tax rates of 32.5% and 37% before reaching the top rate of 45% (currently above $180,000).
Under the new rates, a person with an income of $200,000 will gain another $9,075 of after-tax income. The following table shows the effects of the tax on different levels of income:
|
Taxable Income |
Additional after-tax income |
|
$30,000 |
$0 |
|
$45,000 |
$0 |
|
$70,000 |
$625 |
|
$100,000 |
$1,375 |
|
$135,000 |
$2,925 |
|
$150,000 |
$3,975 |
|
$180,000 |
$6,075 |
|
$190,000 |
$7,575 |
|
$200,000 |
$9,075 |
The government is now discussing changing the tax rates and introducing new rates from the 1st of July 2024. The proposed rates have to go through legislation.
The proposed new rates are as follows:
|
Thresholds ($) |
Rates (%) |
|
0-18,200 |
0 |
|
18,201-45,000 |
16 |
|
45,001-135,000 |
30 |
|
135,000-190,00 |
37 |
|
Over $190,000 |
45 |
The proposed new rates will affect the after-tax income in the following way:
|
Taxable Income |
Additional after-tax income |
|
$30,000 |
$354 |
|
$45,000 |
$804 |
|
$70,000 |
$1,429 |
|
$100,000 |
$2,179 |
|
$135,000 |
$3,729 |
|
$150,000 |
$3,729 |
|
$180,000 |
$3,729 |
|
$190,000 |
$4,529 |
|
$200,000 |
$4,529 |
It is quite clear that the government’s proposed changes will adversely affect high incomes and will provide some benefits to lower levels of income.
What should you do?
At this point, there is no action needed as the proposed changes need to be legislated first. It seems that the Greens are asking for another rate level, and we will have to wait to see the outcome.
We will keep monitoring the situation and update you. As always, if you have any questions, please contact us.
Disclaimer and Warning
The information above is of a general nature only. It should not be used as a source to make financial decisions. It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.