Personal income tax cuts from 1 July 2020

Personal income tax cuts backdated – The ATO has clarified that it will not adjust the over-withheld taxes from 1 July 2020, but instead, these over-withheld amounts will be included in the taxpayer’s tax assessments at the end of the income year.

  • The top threshold of the 19% personal income tax bracket will increase from $37,000 to $45,000;
  • The top threshold of the 32.5% tax bracket will increase from $90,000 to $120,000.

The new low-income tax offset (maximum $700) has also been brought forward to 2020-21, while the low and middle-income tax offset (maximum $1,080) has been retained for 2020-21
Mr. Frydenberg said more than 7 million individuals are expected to receive tax relief of $2,000 or more for the 2020-21 income year compared with the 2017-18 tax settings. Low and middle-income taxpayers will receive relief of up to $2,745 for singles and $5,490 for dual-income families.

Small business $150,000 instant asset write-off has been extended to 30 June 2021

Business loss carry-back will allow businesses (companies only) to carry-back tax losses from 2019-2020, 2020-2021 or 2021-2022 financial years to offset against tax paid in previous income years as far back as 2018-2019 financial years.  The tax refunds will be limited by requiring that the amount carried back is not more than the earlier taxed profits and that the carryback does not generate a franking account deficit. Eligibility for the loss carry-back includes a requirement for the business to have lodged an income tax return for the current year and each of the five years immediately preceding it.

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