The government has announced $1.5 billion worth of tax reforms with the goal of stimulating the economy. You may already be aware of the widely publicised tax rebates, but don’t forget to brush up on how the rest of the information will affect you in the years to come.
Income earners who earn up to $126,000 annually are eligible for a “tax relief” payment up to $1,080 as early as this year if they have their tax returns submitted. According to The Guardian, here’s how this will be calculated:
- Under $37,000: $255
- $37,000 – $48,000: between $255 and $1080 (technically, $255 plus 7.5% of the amount over $37,000 up to $48,000. E.g. If you earn $48,000 p.a., 7.5% of $11,000 = $825, and $255 + $825 = 1080. Therefore, the max amount for this bracket is $1080)
- $48,000 – $90,000: $1080
- $90,000 – $126,000: up to $1080 (3% will be deducted from any amount you earned over $90,000 so you could get nothing)
If you’re still a bit lost and want to know how much you could get, check out the government’s tax relief estimator.
The next stages
This tax rebate package will be delivered to low and middle-income earners, each time they lodge their tax return in the next three years. There will then be a second stage to commence in 2022-23 financial year, and a third stage in 2024-25.
During stage two, the low-income bracket (charged 19% tax) will be raised to $45,000 p.a.
The next tax bracket, currently paying 32.5%, will also move to include earners of up to $120,000 in the stage two, and up to $200,000 in stage three.
The fourth income bracket, currently $90,001 to $180,000, will be $120,001 to $180,000 in stage two, and then demolished in stage three – meaning there will be only four instead of five tax brackets. This leaves the high-income bracket, which will become anything over $200,001 per year.
Although high income earners aren’t receiving much in stage one, they will benefit in the long run.
Foreign resident brackets will also broaden, eventually becoming divided into two brackets in stage three: $0-$200,000 taxed at 32.5% and $200,001+, which will be taxed higher at a $65,000 flat fee plus 45% for anything over the base amount.
How will it affect home ownership?
This new type of stimulus package was brought about to curb slow consumer spending, and ultimately stave off any economic downturn signalled by recent property market trends.
There isn’t much of a hint as to how this will affect homeownership, although the goal is to free up household spending in general. However, News.com.au reports other regulation changes – such as another reduction of the RBA cash rate, plus more flexibility when assessing loan candidates – should certainly help individuals enter the property market. That being said, some argue whether this is a good thing for the economy at large.
At this stage, the consensus among financial experts seems to be that we are simply waiting to see how the tax changes take effect and if the market will respond.
Words by Rebecca Mitchell