The Federal Budget papers contained the the tax rates for resident, non-resident, and working holiday makers, in the coming 2022-23 year and subsequent years (without flagging any reversal of the currently legislated ‘Stage 3’ tax cuts – which deliver a 30% tax rate from $45k to $200k of income. At the same time, the Government announced revised Medicare Levy exemption levels and a new exemption, for ‘low-income’ taxpayers for eligible ‘lump sum’ arrears, from 1 July 2024.
Rates and thresholds – summary
| Rate | 2022-23 and 2023-24 (unchanged) | From 1.7.2024 (unchanged) |
|---|---|---|
| Nil | $0 – $18,200 | $0 – $18,200 |
| 19% | $18,201 – $45,000 | $18,201 – $45,000 |
| 30% | N/A | $45,001 – $200,000 |
| 32.5% | $45,001 – $120,000 | N/A |
| 37% | $120,001 – $180,000 | N/A |
| 45% | $180,001 + | $200,001 + |
| Low and middle income tax offset (LMITO) | N/A | N/A |
| Low income tax offset (LITO) | Up to $700 | Up to $700 |
Foreign residents
For 2023-24 – the tax rates for foreign residents (unchanged) are:
- $0 – $120,000 – 32.5%;
- $120,001 – $180,000 – 37%;
- $180,001+ – 45%.
For 2024-25 and later income years – the tax rates for foreign residents are:
- $0 – 200,000 – 30%;
- $200,001+ – 45%.
Working holidaymakers
For 2023-24 – the rates of tax for working holiday makers (unchanged) are:
- $0 – $45,000 – 15%;
- $45,001 – $120,000 – 32.5%;
- $120,001 – $180,000 – 37%;
- $180,001+ – 45%.
For 2024-25 and later income years – the rates of tax for working holiday makers are:
- $0 – $45,000 – 15%;
- $45,001 – $200,000 – 30%;
- $200,001+ – 45%.
Low income tax offset for 2023-24 (unchanged)
| Taxable income (TI) | Amount of offset |
|---|---|
| $0 – $37,500 | $700 |
| $37,501 – $45,000 | $700 – ([TI – $37,500] x 5%) |
| $45,001 – $66,667 | $325 – ([TI – $45,000] x 1.5%) |
| $66,668 + | Nil |
The maximum amount of the LITO is $700. The LITO is withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000 and then at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.
Medicare levy low-income thresholds for 2022-23
For the 2022-23 income year, the Medicare levy low-income threshold for singles will be increased to $24,276 (up from $23,365 for 2021-22). For couples with no children, the family income threshold will be increased to $40,939 (up from $39,402 for 2021-22). The additional amount of threshold for each dependent child or student will be increased to $3,760 (up from $3,619).
For single seniors and pensioners eligible for the SAPTO, the Medicare levy low-income threshold will be increased to $38,365 (up from $36,925 for 2021-22). The family threshold for seniors and pensioners will be increased to $53,406 (up from $51,401), plus $3,760 for each dependent child or student.
Date of effect – The increased thresholds will apply to the 2022-23 and later income years. Note that legislation is required to amend the thresholds and a Bill will be introduced shortly.
Source: Budget Paper No 2 [p 22]
Medicare levy – exemption on lump sum arrears, for ‘low-income’ taxpayers, from 1 July 2024
The Government will exempt eligible lump sum payments in arrears from the Medicare levy from 1 July 2024. The measure seeks to ensure low-income taxpayers do not pay higher amounts of the Medicare levy as a result of receiving an eligible lump sum payment, for example as compensation for underpaid wages.
Eligibility requirements will ensure that relief is targeted to taxpayers who are genuinely low-income and should be eligible for a reduced Medicare levy. To qualify, taxpayers must be eligible for a reduction in the Medicare levy in the 2 most recent years to which the lump sum accrues. Taxpayers must also satisfy the existing eligibility requirements of the existing lump sum payment in arrears tax offset, including that a lump sum accounts for at least 10 per cent of the taxpayer’s income in the year of receipt.
The measure is estimated to only cost the Budget $2 million over the 5 years from 2022-23.
Date of effect – 1 July 2024.
Source: Budget Paper No 2 [p 22]
Where to get Budget documents
The 2023-24 Budget Papers are available from the following website:
- Budget October 2023-24 – https://budget.gov.au/
More information on the tax and related announcements is also contained in a number of Budget press releases on the Treasurer’s website and the Assistant Treasurer’s website.
Parliamentary sittings
Both Houses of Parliament will sit during the Budget week 9-11 May. The House of Reps (only) will sit 22 May to 1 June, while both Houses will sit for the 2-week period 13-22 June 2023.
[WTB 19, 9.5.23]
[Tax Month – May 2023, previous month] 14.5.23