House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Scott Morrison MP)

General outline and financial impact

Personal income tax plan

Schedule 1 to this Bill amends the tax law to:

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introduce the low and middle income tax offset to reduce the tax payable by low and middle income earners in the 2018-19, 2019-20, 2020-21 and 2021-22 income years; and

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for 2022-23 and later income years, merge the low and middle income tax offset and the LITO into a more generous new low income tax offset.

Schedule 2 to this Bill amends the Income Tax Rates Act 1986 to progressively increase the income tax rate thresholds in 2018-19, 2022-23 and 2024-25.

Together these amendments reduce the income tax burden faced by taxpaying individuals.

Date of effect: The low and middle income tax offset is available for the 2018-19, 2019-20, 2020-21 and 2021-22 income years.

The new low income tax offset is available in the 2022-23 income year and later income years.

The initial changes to income tax rate thresholds apply from the 2018-19 income year.

Further changes to the thresholds at which marginal rates of income tax apply have effect from the 2022-23 and 2024-25 income years.

Proposal announced: This measure was announced on 8 May 2018 in the 2018-19 Budget.

Financial impact: This measure is estimated to have the following impact on revenue over the forward estimates period:

Human rights implications: This Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 2, paragraphs 2.1 to 2.6.

Compliance cost impact: This measure is expected to have a minor regulatory impact.