Tax cuts start today – how big is yours?

The Federal Government’s new round of income tax cuts have come into effect, along with a swag of other tax reforms to kick off the start of the 2009-10 financial year. The income tax cuts will move the 30% tax threshold from $34,000 to $35,000, while the 40% tax rate will be dropped to 38%. […]

Patrick Stafford 01 July, 2009

The Federal Government’s new round of income tax cuts have come into effect, along with a swag of other tax reforms to kick off the start of the 2009-10 financial year.

The income tax cuts will move the 30% tax threshold from $34,000 to $35,000, while the 40% tax rate will be dropped to 38%.

Here are the new tax rates:

Rates and tax payable from 1 July, 2009
Taxable income ($)	Tax payable per year ($)
0 – 6,000	Nil
6,001 – 35,000	Nil + 15% of excess over 6,000
35,001 – 80,000	4,350 + 30% of excess over 35,000
80,001 – 180,000	17,850 + 38% of excess over 80,000
180,001+	55,850 + 45% of excess over 180,000

This means a worker earning $45,000 will see an increase of about $5.80 a week, but someone earning $80,000 will only gain an extra $2.88 per week.

Workers earning over $100,000 will gain the most benefit from the cuts, and will add an extra $10.58 per week to their pay. Those on $130,000 will earn an extra $22, those on $160,000 will earn $33 while those on $180,000 will earn $41.

Additionally, the low income offset will be increased from $1200 to $1350, which means low-income earnings can now earn up to $15,000 a year without paying tax.

The Family Tax Benefit will increase by $5.60 per fortnight for children 12 and under, and by $7.28 per fortnight for teenagers aged between 13-15.

The baby bonus will be lifted by $185 to $5185 per year, with separate childcare payments for one child in full-time care jumping by $6.50 per week to $180.

Those superannuation changes you’ve been hearing about are also now in effect and you could be paying more to salary sacrifice: The Government has dropped the tax concession contribution cap from $50,000 to $25,000 for those under 50-years-old, and from $100,000 to $50,000 for those over 50.

Changes to the taxation of non-commercial losses have been introduced. This will affect high-income earners who rent out a holiday house for a few weeks a year and claim a deduction – this will become much harder to claim.

Additionally, where an entrepreneur is running two businesses with one as a loss, the loss can no longer be offset against other income.