The 2016 Federal Budget released in May tabled an increase in the tax threshold where the 37% tax rate starts. The previous threshold was $80,000 and the new threshold is now $87,000.
So how much tax does this save you? If your income is less than $80,000 then, unfortunately, no savings will be made, but if your income is greater that $80,000 then you will save $4.50 for every $100 you have earned over $80,000. The maximum savings will be $315 or $6.05 per week.
The changes to the rates will occur on October 1st, 2016, so you should see an immediate adjustment to your take home pay of $6.05 per week if your income is above $87,000. If your income is between $80,000 – $87,000 then you will receive a proportional, or pro-rata amount.
The new tax threshold will be backdated to the 1st July 2016, but you will not see any benefit for the 13 weeks leading up to the changes until your 2017 income tax return is lodged. At this point, you will then receive the $78.65, (13 x $6.05), as part of your refund or as a reduction in the amount of tax due for payment.
Higher Tax Bracket
Some mistakenly think that as you move into a higher tax bracket, all of your earnings are taxed at the higher tax rate. Thankfully this is not the case, only the income above the tax bracket is taxed at that rate.
Using the chart below if your income was $92,000, only $5,000 would be taxed at 37%, not the full $92,000.
New Tax Tables
|Taxable Income||Tax on this income|
|$0 – $18,200||Nil|
|$18,201 – $37,000||19c for each $1 over $18,200|
|$37,001 – $87,000||$3,572 plus 32.5c for each $1 over $37,000|
|$87,001 – $180,000||$19,822 plus 37c for each $1 over $87,000|
|Over $180,000||$54,232 plus 45c for each $1 over $180,000|