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The Government has brought forward stage 2 of its planned income tax cuts by two years. Originally intended to apply from 1 July 2022, the tax cuts will come into effect from 1 July 2020 (subject to the passage of the legislation).

The changes involve:

  • Increasing the upper threshold of the 19% personal income tax bracket from $37,000 to $45,000, and
  • Increasing the upper threshold of the 32.5% personal income tax bracket from $90,000 to $120,000

The changes are illustrated below (excludes Medicare Levy):

Rate Current (2019 to 2022) Proposed (2021 to 2024)
0% 0 – $18,200 0 – $18,200
19% $18,201 – $37,000 $18,201 – $45,000
32.5% $37,001 – $90,000 $45,001 – $120,000
37% $90,001 – $180,000 $120,001 – $180,000
45% $180,000 + $180,000 +

The changes will also see the low income tax offset increase from $445 to $700, and the LMITO (Low and middle income tax offset – providing $1,080 for individuals with a taxable income of up to $126,000) will be retained for the 2020-21 FY.

$250 economic support payments

Date of effect November 2020 and early 2021

Two additional economic support payments of $250 each will be made to eligible recipients of the following payments and health care card holders:

  • Age Pension
  • Disability Support Pension
  • Carer Payment
  • Family Tax Benefit, including Double Orphan Pension (not in receipt of a primary income support payment)
  • Carer Allowance (not in receipt of a primary income support payment)
  • Pensioner Concession Card (PCC) holders (not in receipt of a primary income support payment)
  • Commonwealth Seniors Health Card holders
  • Eligible Veterans’ Affairs payment recipients and concession card holders.

The payments are exempt from tax, and will not count as income support for the purposes of any income support payment.

Capital gains tax removed from ‘granny flats’

Date of effect 1 July 2021 subject to the passage of the legislation

At present, if you enter into a formal granny flat arrangement with a relative, such as an elderly parent, there is a risk of capital gains tax (CGT) applying.

Announced pre-Budget, this measure provides a targeted CGT exemption for granny flats under certain conditions. Under the arrangement, CGT will not apply to the creation, variation or termination of a formal written granny flat arrangement providing accommodation for older Australians or people with disabilities.

The exemption only applies to family arrangements or other personal ties and will not apply to commercial rental arrangements.

10,000 additional places in First Home Loan Deposit Scheme

Date of effect 6 October 2020

Announced pre Budget, from 6 October 2020 until 30 June 2021, an additional 10,000 places will be available for first home buyers under the First Home Loan Deposit Scheme to support the purchase of a new home or a newly built home. The scheme enables first home buyers to purchase a home with a deposit of as little as 5% without mortgage insurance. There are currently 27 participating lenders across Australia offering places under the First Home Loan Deposit Scheme.

Aged care support

$1.6bn to help elderly stay at home

As previously announced, the Government has committed to a broad package of aged care funding predominantly focussed on helping older Australians remain at home. $1.6 billion has been provided over four years from 2020-21 to release an additional 23,000 home care packages across all package levels.

Aged care industry monitoring and support

An additional $400 million will see an injection in cash for infrastructure supporting the aged care industry including a new serious incident response scheme and monitoring services.
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