Federal Budget 2022-23 Personal Tax

Below is a summary  of he 2022-23 federal budget for personal tax as delivered on 25 October 2022.

Personal tax rates unchanged for 2022-23; Stage 3 start from 2024-25 unchanged

In the Budget, the Government did not announce any personal tax rates changes. The Stage 3 tax changes commence from 1 July 2024, as previously legislated.

Resident rates and thresholds for 2022-23

The 2022-23 tax rates and income thresholds for residents (unchanged from 2021-22) are:

Taxable income ($)	Tax payable ($)
0 – 18,200	Nil
18,201 – 45,000	Nil + 19% of excess over 18,200
45,001 – 120,000	5,092 + 32.5% of excess over 45,000
120,001 – 180,000	29,467 + 37% of excess over 120,000
180,001+	51,667 + 45% of excess over 180,000

Stage 3: rates and thresholds from 2024-25 onwards

The Budget did not announce any changes to the Stage 3 personal income tax cuts that are set to commence from 1 July 2024.

Under the Stage 3 tax changes from 1 July 2024, as previously legislated, the 32.5 per cent marginal tax rate will be cut to 30 per cent for one big tax bracket between $45,000 and $200,000. This will more closely align the middle tax bracket of the personal income tax system with corporate tax rates. The 37 per cent tax bracket will be entirely abolished at this time.

Therefore, from 1 July 2024, there will only be 3 personal income tax rates – 19 per cent, 30 per cent and 45 per cent. From 1 July 2024, taxpayers earning between $45,000 and $200,000 will face a marginal tax rate of 30 per cent. With these changes, around 94 per cent of Australian taxpayers are projected to face a marginal tax rate of 30 per cent or less.

Resident rates and thresholds – from 2024-25 onwards

The tax rates and income thresholds from the 2024-25 for residents (as already legislated) are:

Taxable income ($)	Tax payable ($)
0 – 18,200	Nil
18,201 – 45,000	Nil + 19% of excess over 18,200
45,001 – 200,000	5,092 + 30% of excess over 45,000
200,001+	51,592 + 45% of excess over 200,000

Rates and thresholds – summary

Rate	2022-23 to 2023-24	From 1.7.2024 (unchanged)
Nil	$0 – $18,200	$0 – $18,200
19%	$18,201 – $45,000	$18,201 – $45,000
30%	N/A	$45,001 – $200,000
32.5%	$45,001 – $120,000	N/A
37%	$120,001 – $180,000	N/A
45%	$180,001 +	$200,001 +
Low and middle income tax offset (LMITO)	N/A	N/A
Low income tax offset (LITO)	Up to $700	Up to $700

Foreign residents

For 2022-23, the tax rates for foreign residents (unchanged) are:

•   $0 – $120,000 – 32.5%

•   $120,001 – $180,000 – 37%

•   $180,001+ – 45%.

For 2024-25 and later income years, the tax rates for foreign residents are:

•   $0 – 200,000 – 30%

•   $200,001+ – 45%.

Working holidaymakers

For 2022-23, the rates of tax for working holiday makers (unchanged) are:

•   $0 – $45,000 – 15%

•   $45,001 – $120,000 – 32.5%

•   $120,001 – $180,000 – 37%

•   $180,001+ – 45%.

For 2024-25 and later income years, the rates of tax for working holiday makers are:

•   $0 – $45,000 – 15%

•   $45,001 – $200,000 – 30%

•   $200,001+ – 45%.

Low income tax offsets – LMITO not extended to 2022-23

The 2022-23 October Budget did not announce any extension of the low and middle income tax offset (LMITO) to the 2022-23 income year. The LMITO has now ceased and been fully replaced by the low income tax offset (LITO).

The March 2022-23 Budget had increased the LMITO by $420 for the 2021-22 income year so that eligible individuals (with taxable incomes below $126,000) received a maximum LMITO up to $1,500 for 2021-22 (instead of $1,080).

With no extension of the LMITO announced in the October Budget, 2021-22 was the last income year for which the offset was available. As a result, low-to-middle income earners may see their tax refunds from July 2023 reduced by between $675 and $1,500 (for incomes up to $90,000 but phasing out up to $126,000), all other things being equal.

Low income tax offset for 2022-23 (unchanged)

For completeness, and as a reminder, low and middle income taxpayers are entitled to one or 2 offsets: LMITO (until the 2021-22 income year) and the low income tax offset (LITO). No changes were made to the LITO in the 2022-23 October Budget. The LITO will continue to apply for the 2022-23 income years and beyond. The LITO was intended to replace the former low income and low and middle income tax offsets from 2022-23, but the new LITO was brought forward in the 2020 Budget to apply from the 2020-21 income year.

Low income tax offset for 2022-23 (unchanged):

Taxable income (TI)	Amount of offset
$0 – $37,500	$700
$37,501 – $45,000	$700 – ([TI – $37,500] x 5%)
$45,001 – $66,667	$325 – ([TI – $45,000] x 1.5%)
$66,668 +	Nil

The maximum amount of the LITO is $700. The LITO is withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000 and then at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.

Deductible gift recipients: two new entities added

The Budget Papers state the following entities will be listed as deductible gift recipients (DGRs) for donations:

•   Australians for Indigenous Constitutional Recognition for donations made from 1 July 2022 to 30 June 2025

•   Australian Women Donors Network for gifts made from 9 March 2023 to 8 March 2028.

Taxpayers may claim an income tax deduction for donations of $2 or more to DGRs.

Source: CPA Australia