The 2023-24 Budget announces a marginal increase in the Medicare Levy low-income thresholds and an exemption of lump sum payments in arrears from the Medicare Levy. As flagged, the Government has also retained the proposed Stage Three tax cuts.
No changes to the proposed Stage Three tax cuts
No announcements were made about personal tax rates or the proposed Stage Three tax cuts. These accordingly remain unchanged.
Commencing from 1 July 2024, the 37% tax bracket will be abolished and the 32.5% tax rate will be lowered to 30% (meaning it will apply to taxable incomes between $45,000 and $200,000).
Increasing the Medicare levy low-income thresholds
The Government will marginally increase the Medicare levy low-income thresholds for singles, families and seniors and pensioners from 1 July 2022.
The threshold for singles will be increased from $23,365 to $24,276. The family threshold will be increased from $39,402 to $40,939. For single seniors and pensioners, the threshold will be increased from $36,925 to $38,365. The family threshold for seniors and pensioners will be increased from $51,401 to $53,406. For each dependent child or student, the family income thresholds will increase by a further $3,760 instead of the previous amount of $3,619.
Extending lump sum payments in arrears from Medicare levy
The Government will exempt eligible lump sum payments in arrears from the Medicare levy from 1 July 2024. This measure means that low-income taxpayers will not pay higher amounts of the Medicare levy as a result of receiving an eligible lump sum payment.
To qualify, taxpayers must be eligible for a reduction in the Medicare levy in the 2 most recent years to which the lump sum accrues and also satisfy existing eligibility requirements.
Digest what was (or wasn’t) in the Federal Budget, what that means, and whether we now anticipate significant tax reform.
