Federal Budget 2020-21 – Personal Income Tax

Income Tax Cuts

Income tax cuts have been introduced and backdated to 1 July 2020. These “stage two” tax cuts were previously due to start in July 2022 and have been accelerated in this Budget to deliver instant tax relief. Tax rates remain the same for this financial year however the range ceilings have been lifted.

Tax Rate 2019-20 2020-21
(New)
2024-25
(And Onwards)
Nil $0 – $18,200 $0 – $18,200 $0 – $18,200
19% $18,201 – $37,000 $18,201 – $45,000 $18,201 – $45,000
30% N/A N/A $45,001 – $200,000
32.5% $37,001 – $90,000 $45,001 – $120,000 N/A
37% $90,001 – $180,000 $120,001 – $180,000 N/A
45% $180,001 + $180,001 + $200,001 +
Low & Middle Income

Tax Offset (LMITO)

Up to $1,080 Up to $1,080 N/A
Low Income Tax Offset (LITO) Up to $445 Up to $700 Up to $700
  • If your FY2021 taxable income is $140,000+ you will now pay $2,430 less tax than before these tax cuts.
  • If your FY2021 taxable income is $80,000 you will now pay $1,080 less tax than before these tax cuts.
  • The ATO has announced that
    •  it will publish updated tax withholding schedules as soon as possible;
    • it will work with payroll software providers to ensure the changes are reflected in take home pay; and
    • changes will be reflected in December 2020 quarter PAYG Instalment notices.

Tax Deductions for Self-Education
Although no changes to these rules were announced in this Budget we expect some in the future. The government has stated that it will consult on changing the existing rules to potentially allow a deduction for the costs of reskilling to change career.

Capital Gains Tax
Changes will be introduced so that CGT will not apply to the creation, variation or termination of a formal written granny flat arrangement. This will remove the adverse tax consequences for the property owner while providing protection for older parents or people with disabilities.
This exemption will commence from 1 July following the passing into law of the relevant legislation (no earlier than 1 July 2021).

Read more of our Federal Budget 2020-21 commentary here:

Business Wage Subsidies 

Other Business Measures 

Business Tax Changes