Then Treasurer, Scott Morrison, announced the Government’s Personal Income Tax Plan (PITP) in the 2018–19 Budget. The PITP reduced personal income taxes over the next seven years through a combination of changes to tax offsets for low and middle income earners and changes in income tax thresholds. The changes were to be implemented over three steps, commencing in 2018–19, 2022–23 and 2024–25. The 2018–19 changes were targeted at low and medium income earners, with the changes in 2022–23 and 2024–25 applying to individuals on higher taxable incomes. [Australian Parliamentary Library, Budget Review 2018–19 Index]
In 2018 the Treasurer placed a tentative costing on his seven-year tax scheme change of $140 billion.
In 2019 the Morrison Government began Stage 1 of what it characterised as a 'flattened' personal income tax scheme which abandoned in large measure Australia's progressive tax scales.
At the time it was expected to cost $18 billion in 2019-20. It mainly comprised a Low and Middle Income Tax Offset (LMITO) worth up to $1,080 a year for taxpayers on $30,000 to $126,000. High income-earners (the top 20% of taxpayers on $90,000 or more) have already gained up to $135 p.a. from an increase in the upper threshold of the 32.5% tax rate to $90,000 in 2018. Overall, Stage 1 mainly went to middle income-earners on $30,000 to $90,000.
Stage 2 began in July 2022. It was projected to cost $16.4 billion in 2023. Stage 2 saw the end of LMITO on 30 June 2022 under the cessation schedule revised by the former Morrison Government. This was the end of targeted offset tax relief for those earning between $66,668 – $126,000.
The scaled Low Income Tax Offset (LITO) is still available for those earning between $37,500 or less and $66,667.
The Australian resident tax rate for 2020-21 to 2023–24.
Australian Taxation Office Table, retrieved 25 January 2024.
There were no changes to any resident personal income tax rates or threshold in the four financial years up to 2023-24.
Stage 3 of the tax scheme commences in July 2024 and as originally legislated, would have seen the 32.5% marginal tax rate will cut to 30% for one big tax bracket between $45,000 and $200,000. This was intended to closely align the middle tax bracket of the personal income tax system with corporate tax rates. While the 37% tax bracket was be entirely abolished at that time. It heavy favoured high income earners. By November 2023 it been found that this last round of tax cuts were estimated to cost around $69 billion over the forward estimates period (to 2026-27). This estimate was higher than previously provided and reflects an additional year in the forecast period, along with updates to economic parameters.
Stage 3 was amended by the Albanese Labor Government in January 2024 to reduce the largess awarded high income earners and lessen the impact of the sustained cost of living pressures.
On Thursday 25 January 2025 in a joint press release by the Prime Minister, Treasurer and Minister for Finance it was announced:
From 1 July 2024, the Albanese Labor Government will:
Reduce the 19 per cent tax rate to 16 per cent (for incomes between $18,200 and $45,000).
Reduce the 32.5 per cent tax rate to 30 per cent (for incomes between $45,000 and the new $135,000 threshold).
Increase the threshold at which the 37 per cent tax rate applies from $120,000 to $135,000.
Increase the threshold at which the 45 per cent tax rate applies from $180,000 to $190,000.
As a result of these changes, on July 1:
All 13.6 million taxpayers will receive a tax cut – and 2.9 million more taxpayers will receive a tax cut compared to Morrison’s plan.
11.5 million taxpayers (84 per cent of taxpayers) will now receive a bigger tax cut compared to Morrison’s plan.
5.8 million women (90 per cent of women taxpayers) will now receive a bigger tax cut compared to Morrison’s plan.
A person on an average income of around $73,000 will get a tax cut of $1,504 – that’s $804 more than they were going to receive under Morrison’s plan.
A person earning $40,000 will get a tax cut of $654 – compared to nothing under Morrison’s plan.
A person earning $100,000 will get a tax cut of $2,179 – $804 more than they would receive under Morrison’s plan.
A person earning $200,000 will still get a tax cut, which will be $4,529. [reduced from est. $9,075]
In addition, the Government will increase the Medicare levy low-income thresholds for 2023-24.
See full press release at:
https://www.pm.gov.au/media/tax-cuts-help-australians-cost-living
UPDATE 1 February 2024
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| SEE: https://treasury.gov.au/tax-cuts |
MAIN SOURCES
The Guardian, Scott Morrison seeks backing for budget tax cuts without full costings, May 2018
ACOSS briefing notes, The Government’s tax cuts:
Who gains? What do they cost?, June 2019
H&R Block 2023 Federal Budget Tax Updates, undated
Australian Tax Office, Tax rates – Australian resident, September 2023 and Individual income tax rates and threshold changes, January 2024
Treasury Question Time Brief, Personal Income Tax - Stage 3, November 2023
Australian Parliamentary Library, Budget Review 2018–19 Index, Personal income tax cuts and the Medicare levy
National Press Club Address by Prime Minister Anthony Albanese, January 2024
The Treasury, Tax cuts to help with the cost of living, January 2024
