The Coalition’s election campaign centred on the parties’ tax plans, and Scott Morrison has stated that tax breaks for individuals are his main post-re-election priority. There are two main aspects of the tax plan: the Personal Income Tax Plan (PITP), implemented over seven years, and changes in income tax thresholds.
The first step of the PITP is immediate tax relief for low and middle-income earners (incomes of up to $125,333). The tax offset amounts to $255 for incomes up to $37,000, which increases incrementally for incomes between $37,000 and $48,000. Taxpayers with incomes between $48,000 and $90,000 will get the maximum relief amount of up to $1,080 for singles and up to $2,160 for dual income families. For those individuals earning over $90,000, the relief decreases incrementally until it reaches $0 at incomes of $125,333. The Coalition proposes to introduce further offsets in the 2022-23 and 2024-25 financial years, though those will be aimed at individuals with higher taxable incomes. The PITP operates alongside the existing Low Income Tax Offset, and they are both applied at the end of the tax return calculation, directly reducing an individual’s tax liability.
However, the delivery of the promised offset amounts is in danger of delay, as it is unlikely that Parliament can be convened on or before 30 June to pass the required legislation on time for the tax cuts to come into effect on 1 July. Instead, lower amounts that have already been legislated for (up to $530) are likely to be applied at the end of this financial year. The Government will likely turn to retrospective action to deliver on its promises, such a ‘supplementary’ offset, with the ATO applying the offset to this financial year even if the required legislation is passed after it ends. The Government is also likely to split up the full tax plan into smaller pieces, so as to be able to pass the immediate changes without too much resistance from the Opposition and crossbenchers in the Senate.