The Australian Taxation Office says workers will start receiving the tax cuts announced in this week’s federal budget “as soon as practicable”.
Shadow treasurer Jim Chalmers has written to the tax commissioner Chris Jordan to confirm Labor’s support for individual tax cuts that are being brought forward by two years as part of the Morrison government’s economic recovery plan.
The ATO says there is a longstanding practice that tax measures are implemented as soon as bipartisan support has been confirmed.
“The ATO will work closely with providers of payroll software and employers to ensure the reduced withholding associated with the threshold changes and the increase of LITO (low income tax offset) is reflected in software as soon as practicable,” it said in a statement on Thursday.
The top threshold of the 19 per cent personal income tax bracket will increase from $37,000 to $45,000 backdated to July 1, while the top threshold of the 32.5 per cent income tax bracket will increase from $90,000 to $120,000.
At the same time, the low income tax offset will increase from $445 to $700.
The tax office said the adjustments to the withholding schedules are designed to ensure that taxpayers have the correct amount of tax withheld from their pay going forward.
“Any ‘over-withholding’ that occurred prior to the employer updating their payroll software and processes will be included in the tax assessment of the employee at the end of the income year,” it said.
The budget also announced the low and middle income tax offset will be retained for the 2020/21 financial year and will be received after individuals lodge their 2020/21 tax return.