20th Jun 2018, 7:28 PM – Senate Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018 - Third Reading - Pass the bill

The majority voted in favour of a motion to pass the bill in the Senate. In parliamentary jargon, they voted to read the bill for a third time.

What happens now?

Since some amendments were added to the bill in the Senate, the bill will now return to the House of Representatives, where our MPs will decide on whether they agree with the changes. If they do, then the bill will become law. If they don't, it will return to the Senate where our senators will decide on whether to insist on the amendments (which means the bill fails) or not (which means the bill will become law).

What does this bill do?

According to the bills digest:

The Government announced its Personal Income Tax Plan (PITP) in the 2018–19 Budget. The PITP reduces personal income taxes over the next seven years through a combination of changes to tax offsets for low and middle income earners and changes in income tax thresholds. The changes will be implemented over three steps, commencing in 2018–19, 2022–23 and 2024–25. The 2018–19 changes are targeted at low and medium income earners, with the changes in 2022–23 and 2024–25 applying to individuals on higher taxable incomes.

The Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018 (the Bill) seeks to implement all components of the PITP. The PITP will be implemented in three steps, commencing in the 2018–19, 2022–23 and 2024–25 income years.

• Step one in 2018–19; introduces the new Low and Middle Income Tax Offset (LAMITO) – a non-refundable tax offset of up to $530 per annum for individuals earning up to $125,333:

• the LAMITO will only apply in the 2018–19, 2019–20, 2020–21 and 2021–22 income years

• from 2022–23 subsequent changes to income tax thresholds will ‘lock-in’ these tax reductions for these individuals

• the top income tax threshold for the 32.5 per cent tax rate will also be increased from $87,000 to $90,000 from 2018–19.

• Step two commencing in 2022–23; increases the maximum rate of the existing Low-Income Tax Offset (LITO) from $445 to $645 per annum. The top income threshold for the 32.5 per cent rate will be increased from $90,000 to $120,000 and the top income threshold for the 19 per cent marginal rate will increase from $37,000 to $41,000 and

• Step three commencing in 2024–25 will extend the 32.5 per cent tax rate up to taxable income of $200,000, abolishing the 37 per cent marginal tax rate entirely. The 45 per cent marginal tax rate will be retained, meaning income in excess of $200,000 will be taxed at 45 per cent, as is currently the case for income in excess of $180,000.