Australians earning $120,000 a year are set to receive a tax cut of up to $2,430 when they submit their tax return.
The Covid pandemic caused economic upheaval and saw the federal government last year delay the budget by five months to October.
Tax relief for the wealthy, announced in the 2019 budget just before the election, wasn’t meant to come into effect until July 2022.
But under last year’s pandemic budget, the ‘stage two’ change was backdated to July last year.
This means those earning $90,000 to $120,000 will pay 32.5c in the dollar instead of 37c when they submit their tax return for the 2020-21 financial year – giving them tax relief of $2,430.
Australians earning $120,000 a year are set to receive a tax cut of up to $2,430 when they submit their tax return. Tax relief for the wealthy was brought forward as the pandemic caused economic upheaval (pictured is Sydney’s Barangaroo)
H&R Block director of tax communications Mark Chapman said Australians of all income levels were in for a treat.
‘Australians will get a bumper tax return this year,’ he told Daily Mail Australia.
More than 10 million Australians are set to get generous tax refunds, and those prepared to do extra paperwork in line for a bigger windfall in the thousands.
Treasurer Josh Frydenberg in the May 2021 budget extended the low and middle-income tax offset for those earning up to $126,000.
In the 2020-21 financial year just gone, 4.6 million Australians earning between $48,000 and $90,000 will receive $1,080 as another 1.8 million people earning $37,000 to $48,000 get back $255.
Those earning between $90,000 and $126,000 will get back a smaller amount from the tax offset, but will benefit from the tax bracket changes that give them back $2,430.
An Australian on an average, full-time salary of $90,000 is already set to get back $1,080.
But because the tax offsets were delayed by five months last year, someone stands to get an extra $400 on top of that based on $20 a week foregone times 20 weeks.
Together, that takes the tax offset relief to almost $1,500 for an average income earner.
Australians have until October 31 to submit their tax returns online if they don’t want to hire an accountant.
Professionals can build on their tax refund by making work-from-home claims.
H&R Block calculated someone who spent all year working from home stood to be able to claim back an average of $1,500 in deductions.
That is based on the special 80c an hour rate brought in March 2020, at the start of the pandemic, which was extended until June 30 this year.
Treasurer Josh Frydenberg in the May 2021 budget extended the low and middle-income tax offset for those earning up to $126,000
Mr Chapman calculated someone who manually added up their electricity and internet bills was more likely to be able to claim back $2,700, if they relied on the lower 52c an hour method.
High-income earners are getting big tax cuts from July 1, 2024, as the 37 per cent tax bracket is abolished and a new 30 per cent tax bracket is created for individuals earning between $45,000 and $200,000.
The number of tax brackets is also being trimmed from five to four for the first time since 1984 as part of the stage three tax cuts announced in 2019.
For now, businesses will also benefit from changes made to alleviate the economic downturn the lockdowns had caused.
Companies buying new machinery have the most to gain.
Before the instant asset write-off scheme debuted late last year, a tradie buying a $40,000 Toyota HiLux had to claim the price of the ute against their income tax over eight years.
H&R Block director of tax communications Mark Chapman said Australians of all income levels were in for a treat this year
Under this scheme, officially known as the ‘temporary full expensing’, a plumber or carpenter can claim the deduction against their income in one hit, with the scheme extended to June 2023.
Mr Chapman said that meant a business owner who made a $200,000 annual profit, could buy a $40,000 ute and reduce their taxable earnings to $160,000.
Small businesses are the key beneficiaries of the ‘instant asset to write-off’ allowing them to deduct the full cost of purchases up to $150,000 in the year of the purchase.
The first change is a cut to the small business corporate tax to 26 per cent in 2020-21 and ultimately to 25 per cent in the current 2021-22 tax year.
This is cut from 27.5 per cent in the 2019-20 financial year.
A small business, defined as a company with annual revenue of less than $50 million, can qualify for these reduced tax rates.
Businesses will also gain from the ‘loss carry-back’ rules that allow companies to get a refund if they made a loss in the 2020-21 financial year but paid tax on profits in previous years.
This helps companies who suffered a loss due to the pandemic, helping to reboot their income for the start of the tax year.
High-income earners are getting big tax cuts from July 1, 2024 as the 37 per cent tax bracket is abolished and a new 30 per cent tax bracket is created for individuals earning between $45,000 and $200,000