Advice Practices Set To Benefit From Tax Cuts

Are you one of the many people in Australia who are asking how the planned tax cuts will benefit you? If so, you're not alone. If this is the case, continue reading for some pointers on how to make the most of the opportunities they present to you. However, contrary to the beliefs of some individuals, not everyone will be eligible for a reduction in their tax liability. It's possible that you'll need to do certain specific actions in order to make sure that you get yours. Continue reading this article for some pointers that will help you get the most out of your tax relief!

The Vast Majority of Working Australians Will Enjoy Reduced Personal Income Tax Burdens

On Friday, October 9, the reductions in taxes that were suggested in the Federal Budget were approved by parliament, and it is possible that some of the advantages will be realised before Christmas.

The administration has proposed tax cuts to take effect on July 1, 2022, although they will be retroactively applied to July 1, 2020. In addition, people with low and moderate incomes can continue to benefit from tax offsets that are already in place.

Marginal tax rate* %	Original threshold income range $ pre-budget	New threshold income range $ 2020/21
0	0 - 18,200	0 - 18,200
19	18,201 - 37,000	18,201 - 45,000
32.5	37,001 - 90,000	45,001 - 120,000
37	90,001 – 180,000	120,001 - 180,000
45	> 180,000	> 180,000

Am I Eligible To Receive The Tax Offsets?

The low and middle-income tax offset may be available to you if your annual income is up to $126,000. If it is, you are qualified for this benefit (LMITO). This was originally intended to be a short-term solution, and it was supposed to expire on the same day that the tax cuts took effect on July 1, 2022. The good news is that the LMITO has been preserved for the fiscal year 2020–21 by the government, despite the fact that these tax cuts have been brought forward.

In addition, if your annual income is less than $66,667, you could be qualified for an additional tax offset that is referred to as the low-income tax offset (LITO). This tax offset had its value enhanced from $450 to $700 as part of this package of tax cuts that was passed.

How Soon Will I Get My New Tax Savings?

Before the holidays, your take-home pay should have reflected the new rates that have been implemented. The Australian Taxation Office (ATO) has given businesses and organisations until November 16 to make any necessary adjustments to their payroll procedures and computerised systems.

Since you will already have paid personal income tax at the original rate as of July 1, this year, you will receive your entitlement to the reduced tax payable for the entire income year 2020–21 when you file your income tax return. This is because you will have paid personal income tax at the original rate since July 1.

Tax Reductions Have Been Brought Forwards by the Federal Government for the 2020-21 Financial Year

To revive a failing Australian economy, the Australian Federal Government has moved ahead Stage 2 of their planned tax cuts and backdated them to 01 July 2020.

There will be tax reductions for millions of Australian taxpayers as a result of the reforms, which were initially scheduled to take effect in July 2022 but will now take place within the current financial year.

What Exactly Are the Tax Cuts for 2020-21?

Among the reductions in taxes are:

• The 19 percent tax bracket will rise from $37,000 to $45,000 as a result of this increase.
• A rise from $90,000 to $120,000 in the threshold for entry into the 32.5 percent tax bracket.
• Raise the tax credit for those with low incomes from $445 to $700.

These tax cuts will, in essence, result in a change to the tax rate that applies to everyone earning more than $37,001, and consequently will result in an increase in the amount of money that is kept in the pockets of workers after each pay period.

What Financial Benefits Will You Achieve from the Tax Cuts?

Your income is a factor in determining how much of a benefit you will receive from the tax cuts, with people in the upper income brackets (those making more than $120,000) obtaining the most advantage from the tax cuts:

• $21,886 – $45,000: up to $1080
• $45,001 – $90,000: $1080
• $90,001 – $120,000: up to $2430
• $120,000+: $2430

When Will You Get The Tax Break?

Because the reductions are set to take effect by the end of the fiscal year 2020–2021, which is currently underway, you may anticipate that they will begin to have an effect on the amount of money that you bring home by the end of the year.

An illustration of how the tax cuts will work in practise is as follows:

Josie is a human resources (HR) professional who brings in a yearly salary of $80,000. As a result of the tax reduction, she will receive an additional $1,080 in increased income each year. This will result in around an additional $20 added to her take-home pay each and every week once the tax cuts have been implemented in their entirety.

Regressive Tax Cuts

You have a good chance of seeing a boost when it comes time to file your taxes as a result of the tax cuts that were backdated to the beginning of the tax year (1st July 2020).

Let's take a second look at the example that was given earlier with Josie.

If the tax cuts are implemented on December 1, Josie will have been out of work for a total of five months (or roughly 20 weeks worth of the tax cuts).

However, she does not end up losing that money. Instead, any money that she missed out on due to the retroactive tax reduction would be refunded to her when she files her taxes. (20 weeks x $20 = $440).

This $440 will either raise the tax refund she receives or lessen the amount of tax that she owes when it comes time to file her taxes.

How Will the Tax Cuts Affect People Making a Middle-Class or a Low Income?

Earners with low and moderate incomes are eligible for either of two different offsets. In contrast to weekly tax reduction, both of these are applied when you file your tax return.

Low Income Tax Credit (Increased this year)

Along with tax savings, the government also announced an increase in the standard deduction, which will now be $700 rather than $445.

Those with annual incomes of up to $37,000 are eligible for the entire $700 rebate, which translates to an additional tax offset of $255 for the fiscal year 2020-21.

The low-income offset is decreased by 1.5 cents for every dollar earned in excess of $37,001 by persons whose annual income falls between $37,001 and $66,667.

Tax relief for people with moderate incomes (No change this year)

Earners with low and middle incomes are eligible for a tax credit known as the "Low and Middle-Income Tax Offset" (LMITO).

The amount of LMITO to which you are entitled is directly proportional to the amount of taxable income you have:

Taxable Income	2019-2020 LMITO Rebate Amount
$25,000	$255
$40,000	$480
$60,000	$1,080
$90,000	$1,080
$120,000	$180
$150,000	$0
$200,000	$0

Low and Middle-class Earners may be Required to Pay More Tax Next Year

Initially, the LMITO was going to come to an end when the stage 2 tax cuts were going to be implemented; however, the Federal Government has decided to continue the LMITO for the 2020-21 tax year.

Nevertheless, the LMITO will no longer be in effect beginning in 2021-2022. Because of this, some people with low and middle-incomes could end up paying up to 1,080 dollars more in taxes next year compared to what they paid this year.

How Will the Tax Cuts Affect People With High Incomes?

People in Australia who make more than $120,001 per year are eligible for the maximum benefit from the cut and will see a reduction in the amount of tax they pay this year of $2,430.

These reductions will be carried through into subsequent tax years until the Stage 3 reductions are implemented in July 2024.

Stage 3 Tax Cuts

The Australian government's goal is to lower the income tax rate for its citizens by implementing a three-stage tax cut programme, and the tax cuts that were implemented in Stage 2 are part of that programme.

Under the stage 3 tax cuts, which are scheduled to take effect in July 2024, the tax brackets of 32.5% and 37% will be eliminated, and they will be replaced with a bigger tax bracket of 30% for taxpayers earning $45,000 to $200,000. These are the implications that these Stage 3 tax adjustments will have on the various levels of income:

• $45,000 salary: $0 per year
• $90,000 salary: $1,125 per year
• $200,000 salary: $3,875 per year

Tax Rate	Current (2019-2020)	Stage 2 -2020-2021	Stage 3 – 2024-2025
0%	$0 – $18,200	$0 – $18,200	$0 – $18,200
19%	$18,201 – $37,000	$18,201 – $45,000	$18,201 – $45,000
30%	–	–	$45,001 – $200,000
32.5%	$37,001 – $90,000	$45,001 – $120,000	–
37%	$90,000 – $180,000	$120,000 – $180,000	–
45%	$180,001 and above	$180,001 and above	$200,001 and above

Tax Relief to Assist the Dedicated Citizens of Australia and to Foster the Creation of Additional Jobs

As part of the Economic Recovery Plan for Australia, the government will provide significant tax relief in order to facilitate the creation of new employment, the revitalisation of our economy, and the assurance of Australia's future.

As a result of bringing forwards the second stage of our Personal Income Tax Plan, more than 11 million taxpayers will receive a tax decrease that is retroactive to the first of July in 2020.

The business community will receive help in the form of time-limited tax benefits that allow instant expensing and loss carry-back provisions.

By bringing down the price of investments, this will lead to more economic activity and the creation of new jobs.

It is estimated that the implementation of these policies to lessen the burden of personal income tax and to encourage business investment will result in the creation of approximately 100,000 new jobs by the end of the fiscal year 2021-22 as well as an increase of approximately $6 billion in GDP in 2020-21 and $19 billion in 2021-22 respectively.

Individuals Will Receive Tax Relief

Personal income tax cuts that were introduced in the previous two budgets helped to put more money in the pockets of hard-working Australians and, in the process, strengthened our economy to adapt to the impact that COVID-19 will have.

We will move forwards by two years the implementation of Stage two of our plan to reform the personal income tax as part of the budget for 2020-21. Beginning on July 1, 2020:

• The tax credit for individuals with low income will go up from $445 to $700;
• The highest income-based tax bracket, the 19 percent rate, will have its threshold raised from $37,000 to $45,000; and
• The highest income level that triggers an increase to the 32.5 percent tax rate will go from $90,000 to $120,000
• Additionally, the government will provide additional support that is specifically targeted for Australians with low and middle incomes. Earners with low and moderate incomes will receive a one-time additional benefit from the low and middle-income tax offset in the amount of up to $1,080 in the fiscal year 2020-21. (LMITO).

The LMITO was scheduled to be eliminated upon the beginning of Stage two; however, the one-time additional benefit that will be provided in 2020-21 will give help to households as well as stimulus to the economy.

Together, pushing up Stage two and granting the additional LMITO will mean that more than 11 million Australian taxpayers will enjoy a tax break, with effect from July 1 of this year. This will give them more money to spend on the things that are important to them, giving them greater freedom to pursue their passions.

As a result of these individuals spending less money on taxes, local companies will be able to keep their doors open and recruit more employees.

When compared to the tax settings for the 2017-18 fiscal year, it is anticipated that more than 7 million persons will enjoy tax relief of $2,000 or more during the income year of 2020-21. Taxpayers with low and moderate incomes will be eligible for relief of up to $2,745 for single filers and $5,490 for families filing jointly.

The work will be rewarded, and new employment will be created.

Tax Relief For Business

Approximately eight out of every ten people living in Australia have jobs in the private sector.

We need to get the private sector moving again so that we can assist in the rebuilding of our economy and the creation of additional jobs.

In light of the fact that we were able to successfully extend the scope of the instant asset write-off as part of our response to COVID-19, we have decided to make it possible for 99 percent of all firms to deduct the full value of any assets that they buy.

Until 7:30 p.m. (AEDT) on the 6th of October 2020, businesses with a turnover of up to $5 billion will be allowed to instantly deduct the full cost of qualified depreciable assets purchased from that date onward and first utilised or installed by the 30th of June 2022.

It will encourage investment, increase the productive potential of the country, and result in the creation of tens of thousands of employment.

These acquisitions will be made, sold, delivered, installed, and serviced by a network of small enterprises.

In addition to this full expensing, the government will, for the time being, permit businesses with a turnover of up to $5 billion to credit their tax losses against earlier profits on which tax has already been paid.

A targeted boost to cash flow will be provided as a result of this, which businesses all around the country sorely need. In a normal economy, companies would have to get back to making a profit before they could use their losses. However, we are not living in a normal economy.

Losses incurred up until June 2022 are eligible to be deducted from or applied to past profits made in or after the 2018-2019 fiscal year. These companies desperately need assistance right now in order to keep their employees.

The government will also provide tax relief in the amount of $105 million to broaden access to a variety of tax concessions for small businesses by raising the bar for the aggregated yearly turnover necessary to qualify for these concessions.

For the first time, companies who have an aggregated yearly turnover of between $10 million and $50 million will have access to up to ten small business tax reductions. This is a significant change from the previous situation.

The extended concessions will be applicable in three phases, with the first phase beginning on the first of July in the year 2020. Because of the reforms, around 20,000 firms will have less red tape to deal with, which will help them hire and keep employees.

Additionally, the government will improve previously announced measures in order to invest an additional $2 billion via the Research and Development Tax Incentive. These alterations are scheduled to take effect on July 1, 2021, and they will provide assistance to over 11,400 businesses that invest in research and development in order to generate jobs for both today and tomorrow.

As part of its plan to generate new employment, revitalise the economy, and ensure Australia's continued prosperity, the Australian government is providing tax relief to businesses and hard-working individuals in the country.

Motives For Why The Argument In Favor Of A Company Tax Cut For Big Business Has Failed

A $65 billion tax cut for corporations means that there will be billions less for hospitals, schools, and other services.

A tax cut for firms amounting to $65 billion would result in a loss of billions of dollars for essential services such as schools and hospitals. The modelling done by the Treasury Department even predicts that these corporation tax savings will be matched by cuts to services and increased taxes on individuals instead.

The top four banks receive an additional $9.5 billion. Really.

The main four banks in Australia are among the most lucrative financial institutions in the world and are setting new records for their profits. They will receive an additional $9.5 billion dollars as a result of the tax cut over the course of the first ten years of the tax cuts, with the Commonwealth Bank receiving $2.8 billion of that total sum on its own.

By the end of the 2026–2027 fiscal year, each of the four largest banks would be receiving $3.5 billion annually. That's right: on an annual basis.

Tax evaders and foreign shareholders stand to gain the most.

Tax evaders and shareholders from other countries will benefit the most from the reduction in the corporate tax rate. Because of Australia's dividend imputation structure, the majority of the advantages of the business tax cut are distributed to shareholders from other countries, rather than Australian stockholders.

Why does the Business Council of Australia continue to push so hard for tax cuts if Australian investors are going to be the ones who lose the most money? The BCA is supported financially by its members, and even a cursory examination of the BCA's membership might reveal the real reasons behind its actions.

There is no connection between more employment or economic growth and lower corporate tax rates.

If Coles and Woolworths pay less in business taxes, do you think they would increase the number of people working the checkouts? I seriously doubt that. There is no connection between lower corporate tax rates and either increased employment or increased economic growth. This is supported by evidence from the past and from around the world, as well as by common sense.

Businesses conduct transactions in Australia because they want to.

Businesses have a presence in Australia for the simple reason that they desire to have a presence there. The corporate tax rate does not affect the amount of foreign investment made. In point of fact, the majority of Australia's overseas investment originates from nations that have lower tax rates.

Third of the advantages of the cut are distributed among just 15 enterprises.

Only 15 enterprises will receive a third of the total benefits that will come from the reduction in corporation taxes. Because the majority of these businesses are major players in industries with a limited number of other providers (for example, telecoms and supermarkets), it is highly unlikely that they will alter their hiring procedures as a result of the tax cut.

There are more effective strategies to boost the economy and create jobs.

There are a lot of other ways that are a lot more cost effective to improve the economy and create jobs. According to a number of studies, cutting taxes for corporations is less likely to stimulate economic growth than making financial investments in educational institutions and programmes.

The advantages are founded on irrational presumptions (to put it lightly).

It is ludicrous to believe that lowering the corporate tax rate would all of a sudden force multinational firms to stop dodging the tax (this is referred to as a "morality dividend" in an optimistic context). In the economic modelling that purports to show that cutting corporation taxes is beneficial to the economy, this is only one of the strange assumptions that was made.

When will the corporate tax rate be low enough to appease major corporations?

Together with the Business Council, ten CEOs of major corporations made a direct request to the Senate for tax cuts for corporations, the proceeds of which, we are assured, will be used towards increased pay for employees.

According to the findings of our study, not only have fifty percent of these businesses paid NO corporation tax over the course of the last two fiscal years, but it is also abundantly evident where the "increased wages" are actually going.

The corporation tax cut won't raise salaries or create more employment, as both the general public and CEOs privately acknowledge.

Only one-fifth of the CEOs of the more than 130 companies that are members of the Business Council in Australia selected higher wages or more jobs as their prefered response to the company tax cut, according to a report in the Australian Financial Review (AFR). The survey was conducted in secret by the Business Council of Australia (BCA). More than 80 percent of respondents chose to either increase investment or return funds to shareholders.

The results of a study of CEOs conducted by the Business Council and published in the AFR

When the general public was given a similar range of options and asked what they believed companies would most likely do with the company tax cut, research from the Australia Institute shows that 78% of respondents selected: give it to shareholders, more investment, or increase executive pay; only 17% selected increase wages or "none of these" (i.e. something else, like more jobs.)

Why the hurry? Why do the tax breaks for large corporations need to be pushed through the Senate before Easter if they won't take effect for more than four years?

Why is it necessary for us to reduce taxes on corporations by $65 billion right now? Why are we in such a hurry? Although there has been a lot written about the arguments for and against the cuts, the more important economic and political question is why the Senate feels the need to rush through significant tax cuts that won't take effect for more than four years, just five weeks before we see the budget papers.

Despite the fact that the cost of this legislation is 10 times as much as we've spent on the Murray-Darling Basin Plan, the government is determined to rush through the legislation during the next sitting of the Senate. This is despite the fact that the legislation will have no impact whatsoever on the budget for the current fiscal year.

The legislation hasn't even undergone a legislative enquiry, despite the fact that it represents one of the heaviest blows to our source of income.

Despite the fact that this legislation will have a significant negative impact on Australia's income base, it has not been subjected to any kind of investigation.

And even its predecessor, the Enterprise Tax Plan No. 1, was only available for public comment for a total of eight days (and two of those days were weekends), with the committee reporting only 17 days after the public comment period ended (including 6 days of weekend, and a number of public holidays depending on the state). The problem is that there were no public hearings held on the matter.