Going Out at The Top – The End of LMITO
The low-and-middle income tax offset (LMITO) will be increasing for the 21/22 income year for those who have incomes of less than $126,000 pa. The increase of $420 or $1.15 per day provides some help, but it will likely only soften the increase in costs to fuel, groceries, housing and cars. The cost of clothing has increased by 6.8%, cars up 6.3%, fuel up by 6.6% and vegetables up 6.1%. according to the December 2021 data (latest available at time of writing). This relief from LMITO is temporary, as it will be phased out after 30 June 2022.
$250 Cost-of-Living Payment
The $250 cost-of-living payment will be paid to those who receive government payments and will be tax exempt. Like the LMITO tax offset, the amount is small and will be quickly absorbed into the increased costs of goods.
Next Big Move in 2024
Looking forward, from 1 July 2024, the third stage of personal income tax rates and thresholds will have a significant switch. The 19% tax rate upper threshold will increase from $37,000 to $45,000. The 32.5% and 37% tax rate will be replaced by a 30% tax rate for those in the next income bracket. This bracket has increased the upper threshold to $200,000. And of course, the income threshold for the highest marginal tax rate will increase to $200,000.
A Greater Impact for High Income Earners
The taxation system provides incentives to high income earners. For those on the highest marginal tax rate, even if their marginal tax rate hasn’t changed, it means a tax saving of $9,075 per annum. While those earning less than $45,000 will not be impacted at all by the change in tax rates and thresholds.
Tao Hsu is a Senior Financial Advisor at Viridian Advisory.
This post and some supporting materials may be regarded as general advice. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of any general advice we may have given you, having regard to your own objectives, financial situation and needs before acting on it. Where the information relates to a particular financial product, you should obtain and consider the relevant product disclosure statement before making any decision to purchase that financial product. The material in this post is correct and complete as of the date it was posted. Viridian is not responsible for, and expressly disclaims all liability for, damages of any kind arising out of use, reference to, or reliance on any information contained within this site.