Effective Tax Rates from the Federal Budget 2018/19 Personal Tax Plan

On Tuesday, 8 May 2018 the Turnbull Government handed down the Federal Budget 2018/19 which included lower personal tax rates for all Australians through the Australian Government’s Personal Income Tax Plan.

Senior Tax Counsel Professor Robert Deutsch and Tax Counsel Stephanie Caredes at The Tax Institute – the leading forum for the tax community in Australia – have worked up some very revealing numbers showing the effective rate of tax at different levels of income now, post 1 July 2018 and post 1 July 2024 based on the Government’s personal tax rate plans. The Table below encapsulates their research.

Professor Deutsch said that “the Table shows that even though the Government’s policy will deliver the same marginal tax rate of 32.5% for a person on $50,000 and a person on $180,000 from 1 July 2024, the effective tax rates will be 16.01% and 29.50% respectively.”

“After 1 July 2024, the actual tax paid will be $8,007 for the $50,000 earner and $53,107 for the $180,000 earner. Furthermore, the effective rate, which is what really matters, is highly progressive rising gradually from nil on an income of $20,000 to 30% on an income of $200,000,” said Professor Deutsch.

“It clearly is not correct to say that the same tax is paid by someone on $50,000 and someone on $180,000. The most that can be said is that they have the same marginal tax rate which is a very different thing.”