Cost-of-living tax cut support
Cost-of-living tax cut support
As is to be anticipated in a pre-election budget, the Government has announced cost-of-living support for all Australians. Additional tax cuts have been announced beyond those progressively implemented since 1 July 2024. Medicare levy relief for low-income earners has also been announced, along with a six-month extension of the energy bill rebate, providing further savings of $150 ($75 per quarter). These developments are particularly timely for Australians currently facing increasing cost-of-living expenses and financial challenges.
Tax cuts for every Australian
From 1 July 2026, the Government will implement additional tax cuts for the income threshold $18,200 - $45,000, lowering the rate from 16% to 15%. Additionally, there will be a subsequent reduction to 14% commencing on 1 July 2027. These measures will result in a $268 annual tax saving for anyone earning $45,000 or more in the 2026-27 financial year, rising to $536 per year in the 2027-28 financial year.
Medicare levy relief
The Government will increase the Medicare levy low-income thresholds for singles, families, seniors, and pensioners effective from 1 July 2024 to aid in the cost-of-living crisis. This adjustment to the thresholds ensures that low-income individuals continue to be exempt from paying the Medicare levy or pay at a reduced rate.
A summary of the revised thresholds is provided below:
|
Category |
Current threshold (2023 - 2024) |
New threshold (2024 - 2025) |
|
Singles |
$26,000 |
$27,222 |
|
Singles (seniors and pensioners) |
$41,089 |
$43,020 |
|
Families |
$43,846 |
$45,907 |
|
Families (seniors and pensioners) |
$57,198 |
$59,886 |
|
Families (every additional dependent or student) |
$4,027 |
$4,216 |
BDO comment
The Government's plan to cut the personal tax rates and increase the Medicare levy low-income thresholds offers some relief to taxpayers impacted by the cost-of-living crisis. However, for many Australians, the tax cuts may not be enough to significantly impact their financial situation, particularly those who are earning less than $45,000.
Ultimately, these tax cuts are welcome, however, are only incremental adjustments rather than a comprehensive overhaul of the tax system. While they may provide temporary relief, they do not provide true tax reform which addresses deeper structural issues.