Household Assistance Package – tax changes: information for individuals

The Australian Government has implemented the Household Assistance Package to help low and middle income families under its Clean Energy Future initiative.

Do the changes affect how you complete your 2011-12 tax return?

The changes will not affect your 2011-12 tax return. They are effective from 1 July 2012 so they will impact how you complete your 2012-13 tax return.

What changes came into effect on 1 July 2012?

From 1 July 2012, the government is delivering tax cuts to help low and middle income households with the expected rise in the cost of living while moving to a Clean Energy Future. As part of this you may notice a reduction in the amount of tax withheld from your pay.

Under the tax reforms:

  • The tax-free threshold increases from $6,000 to $18,200. This means if you earn less than $18,200 per year you do not need to pay income tax, or if you earn more then $18,200 per year you will only pay income tax on earnings over $18,200.
  • The personal tax rate increases from 15% to 19% applying to earnings that exceed $18,200 but not $37,000. The second marginal tax rate increases from 30% to 32.5% applying to earnings that exceed $37,000 but not $80,000
  • If you have a taxable income below $80,000, you will receive a tax cut (around $300 a year).
  • The maximum value of the low-income tax offset (LITO) reduces from $1,500 to $445, with the reduction rate being decreased to 1.5 cents foreach dollar of taxable income over $37,000. No offset will be available if your income exceeds $66,667.
  • The pensioner tax offset merges with the more generous Senior Australians tax offset to form the new seniors and pensioners tax offset (SAPTO).
  • There have been some changes to the Medicare levy and Medicare levy surcharge thresholds. These changes raise the low-income threshold and phase-in limits to ensure individuals do not have a Medicare levy debt where they face no income tax liability on their taxable income.

Why do you need to know about these reforms?

Depending on your individual circumstances, you may notice an increase in your pay due to a reduction in the amount of tax withheld. This is because of changes to the tax-free threshold and personal tax rates.

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