Will the new tax changes impact my pay?
WITH the passage of the Government's personal income tax cuts, what impact will this have on take-home pay?
On the June 20, 2018, the Turnbull Government secured passage of their personal income tax reform package. The total package will see income tax rates cut over a seven-year period with finalisation in 2025 tax year. Under the changes, the 37 per cent tax rate will be eliminated altogether by the 2025 tax year, putting 90 per cent of all taxpayers on the flat tax rate of 32.5 per cent for every dollar they earn between $40,000 and $200,000.
The first stage of the tax cuts took effect on July 1, 2018 with the increase in the threshold for the 32.5 per cent tax rate increasing from $87,000 to $90,000.
Based on your income of $95,000, the income tax will be reduced by $135 for the 2018-2019 tax year.
- The Medicare Levy will be 2 per cent, however, you may be liable for a Medicare Levy Surcharge of 1 per cent if you do not have private health insurance.
- The Australian Taxation Office has notified employers of the change and issued instructions to increase the upper threshold for the 32.5 per cent marginal tax rate from $87,000 to $90,000 from July 1.
- The Employer-Sponsored Superannuation Guarantee Contribution of 9.5 per cent will be unchanged at $9025 for the tax year.
If you wish to confirm that the correct tax is now being withheld, visit www.ato.gov.au and use their online income tax estimator.
Under a Modern Award, with all the recently announced tax changes should we be expecting a wage increase?
From July 1, 2018, the minimum wage for all employees covered by the national minimum wage or a modern award will increase to $719.20 per week or $18.93 per hour. The change announced by the Fair Work Commission represents a 3.5 per cent wage increase. If you are unsure which award you are covered under, visit www.fairwork.gov.au and search for your applicable award.
Please note that increase to minimum wages or modern award may not be applicable to those who are already receiving more income than the minimum or award provisions.
To check that your employer has increased your income in line with your applicable award visit the Fairwork Australia, Annual Wage Review and registered agreements section on their website.
If you were entitled to penalty rates, please note that these may be affected by changes that took effect from July 1, 2018.
Q&A with The Coach first appeared on www.wealthpartners.net.au. Any general advice in this story doesn't take account of personal objectives, financial situation and needs.