Personal Income Tax

2019 Budget: Income Tax Cuts from 1 July 2018

Written by Craig Moschner, CA

5 minute read


It’s the start of a new financial year and the ideal time review your finances and think about:

 –  How much money will I be making this year?

 –  Will I be able to pay all my bills when due?

 –  Can I continue to live my amazing lifestyle? If not, they perhaps you should consider using a budget!

The federal government is no different when it comes to their budget and who is entitled to their tax cuts.

We have read the federal government’s budget for you and highlighted the tax cuts that will impact you from 1 July 2018.

Note:  the following changes have now passed parliament on 21 June 2018 and is now legislation.

Income Tax Cut for Low and Middle-Income Earners

This year a new tax offset or tax cut called “Low and Medium Income Tax offset” (LMITO) was introduced.

This tax cut reduces the income tax you would have otherwise paid at the time you lodge your Income Tax Return.

Created by the government to help relieve the increasing cost of living pressures for those on low and middle-income earnings.

This tax cut provides:

 – $200 for those under $37,000 (Taxable Income),

 – $530 for those earning $67,000 (Taxable Income),

 – Nil for those above $125,000 (Taxable Income).

We decided to compare this new tax offset with the existing “Low Income Tax Offset” (LITO).

Interestingly the biggest tax cut is $810 for taxpayers on $48,000 (Taxable Income) totalling $810.




Income Tax Cut for Middle and High-Income Earners

In an interesting change of events this year’s budget provides for a tax cut to those middle and high income earners,

Those with $90,000 or more (Taxable Income) will receive a flat $135 tax cut.

Note that instead of receiving this tax cut at the time of lodgement of the Income Tax Return as mentioned above for the new “Low and Medium Income Tax offset” (LMITO) they will instead start to receive this tax cut over the course of the next financial year, from the first pay slip issued from 1 July 2018.


This would take form in the reduction to the Pay As You Go Withholding (PAYGW) from your employer

Or if you are a business owner, as a variation in your Pay As You Go Instalment (PAYGI).


This tax cut was not provided due to these taxpayers’ concerns of increase to cost of living pressure

But rather the government’s expectations of wages growth called “bracket creep” for these middle and high-income earners.



Income Tax Rate Changes from 1 July 2022 and 1 July 2024

There are more changes to the personal income tax rates that have now passed Parliament which start from 1 July 2022 and 1 July 2024.


These changes have reduced the number of tax brackets to allow approximately 94 per cent of taxpayers to pay tax at 32.5 per cent or less.

In contrast, if no changes were made, this is forecasted to be 63 per cent of taxpayers in 2024–25.


These drastic tax cuts are a result of the government’s vision to:

 –  Encourage Australians to take on additional work, seek advancement and improve their skills.

 –  Reducing international competitiveness and the ability to attract and retain talent and skills.


No change to Medicare Levy – NDIS fully funded

Medicare gives Australian residents access to health care and is partly funded by taxpayers who pay the Medicare Levy when lodging their Income Tax Return being 2% of their Taxable Income.


Previously announced was the plan to increase the Medicare Levy from 2% to 2.5% to fund the National Disability Insurance Scheme (NDIS).

NDIS supports a better life for hundreds of thousands of Australians with a significant and permanent disability and their families and carers.


Due to the economy delivering stronger results, the Government has planned to fund further expenditure needed through the existing budget.

This means the Government will not increase the Medicare levy rate from 2.0 to 2.5 per cent of Taxable Income from 1 July 2019.


Key Takeaway Points:

 –  Those up to $125,000 (Taxable Income) will receive a tax cut upon lodgement of their Income Tax Return between $200 and $530 – refer to graph above.

 –  An additional tax cut of $135 for those at or above $90,000 (Taxable Income) received through their payslip or PAYGI instalment reduction from 1 July 2018

–  Significant income tax cuts starting from 1 July 2022 and 1 July 2024 financial years

–  No increase to the Medicare Levy as NDIS is fully funded

With only income tax cuts this year and no income tax increases, it appears everyone is winning.

Although significant income tax cuts are now legislated in four and six years time – the question remains: would we as taxpayers still receive these tax cuts when the time comes? I remain hopeful that we will.

Disclaimer: This page contains general information only and has been prepared without taking into account your circumstances, objectives, or financial situation. We recommend that you consider whether this information is appropriate and always seek professional advice in relation to your circumstances.

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