The Government's seven-year personal income tax reform plan passed Parliament on 21 June 2018 intact after the Senate did not insist on earlier amendments that would have removed the third step from the plan. The Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018 then received Royal Assent on 21 June 2018 as Act No 47 of 2018. 

The personal income tax changes, announced in the 2018–2019 Federal Budget, are as follows:

  • Step 1 will see a new non-refundable Low and Middle Income Tax Offset (LMITO) from 2018–2019 to 2021–2022, designed to provide tax relief of up to $530 per individual for each of those years. The offset will be delivered on assessment after an individual submits their tax return and will be in addition to the existing low income tax offset (LITO). The LMITO will provide a benefit of up to $200 for taxpayers with taxable income of $37,000 or less. Between $37,000 and $48,000, the value of the offset will increase at a rate of three cents per dollar to the maximum benefit of $530. Taxpayers with taxable incomes from $48,000 to $90,000 will be eligible for the maximum benefit of $530. From $90,001 to $125,333, the offset will phase out at a rate of 1.5 cents per dollar.
  • Step 2 will increase the top threshold of the 32.5% tax bracket from $87,000 to $90,000 from 1 July 2018. In 2022–2023, the top threshold of the 19% bracket will increase from $37,000 to $41,000 and the LITO will increase from $445 to $645. The increased LITO will be withdrawn at a rate of 6.5 cents per dollar between incomes of $37,000 and $41,000, and at a rate of 1.5 cents per dollar for income between $41,000 and $66,667. The top threshold of the 32.5% bracket will increase from $90,000 to $120,000 from 1 July 2022.
  • Step 3 will increase the top threshold of the 32.5% bracket from $120,000 to $200,000 from 1 July 2024, removing the 37% tax bracket completely. Taxpayers will pay the top marginal tax rate of 45% for taxable income exceeding $200,000 and the 32.5% tax bracket will apply to taxable incomes of $41,001 to $200,000.
Tax rates and thresholds for 2018–2019 onwards

The following table reflects the now legislated personal tax threshold and rate changes (bold), excluding the 2% Medicare levy.

 Rate   2018-2019 to 2021-2022     2022-2023 and 2023-2024     2024-2025 onwards  
0% $0 - $18,200 $0 - $18,200 $0 - $18,200
 19% $18,201 - $37,000 $18,201 - $41,000 $18,201 - $41,000
32.5% $37,001 - $90,000 $41,001 - $120,000 $41,001 - $200,000
37% $90,001 - $180,000 $120,001 - $180,000 N/A
45% %180,001+ $180,001+ $200,001+


Source: www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r6111.