Insight

Personal tax changes - save or spend?

08 December, 2020

The Government recently increased the thresholds for most personal tax rates for this financial year. This has been brought forward to help boost consumer spending and accelerate economic growth.

The Government recently announced that they have increased the thresholds for most personal tax rates for the 2020/21 financial year. This has been brought forward from 1 July 2022 to help boost consumer spending and accelerate economic growth.

New personal marginal tax rate

Tax rate

Income threshold for 2019/2020 (pa)

Income threshold for 2020/21 (pa)

Nil

0 - $18,200

0 - $18,200

19.0%

$18,201 - $37,000

$18,201 - $45,000

32.5%

$37,001 - $90,000

$45,001 - $120,000

37.0%

$90,001 - $180,000

$120,001 - $180,000

45.0%

$180,000+

$180,000+

What does this mean for your take home income?

Depending on your income, these new thresholds will mean more money in your pocket.

If you are an employee, you may have started to see more income being deposited into your bank account as a result of the reduced PAYG withholding tax.

However, as this change has been made part way through the 2020/21 financial year, you may receive the additional tax saving as either an additional payment from your employer or a tax refund when you lodge your income tax return.

While the Government has put this in place with the hope that it will boost consumer spending, it will be interesting to see if consumers choose to spend or save this amount over the next year.

Taxable income

Previous tax payable

New tax payable

Saving

$20,000

$0

$0

$0

$40,000

$4,467

$3,887

$580

$60,000

$11,067

$9,987

$1,080

$80,000

$18,067

$16,987

$1,080

$100,000

$25,717

$24,187

$1,530

$120,000

$34,117

$31,687

$2,430

$140,000

$42,097

$39,667

$2,430

$160,000

$49,897

$47,467

$2,430

$180,000

$57,697

$55,267

$2,430

$200,000

$67,097

$64,667

$2,430

If you are an employee, you may have started to see more income being deposited into your bank account as a result of the reduced PAYG withholding tax.

However, as this change has been made part way through the 2020/21 financial year, you may receive the additional tax saving as either an additional payment from your employer or a tax refund when you lodge your income tax return.

While the Government has put this in place with the hope that it will boost consumer spending, it will be interesting to see if consumers choose to spend or save this amount over the next year.