Budget 2016: How much more will you pay in tax?

Angus Kidman 3 May 2016

BudgetTax

New rules mean higher tax rates won't kick in until your income goes above $87,000.

What's changing?

The government plans to increase the second-top tier tax threshold from $80,000 to $87,000. Previously, if you earned more than $80,000 a year, you paid 37 cents in the dollar tax on the income above that figure (with lower rates applying to the bulk of your income). Now, that rate will only apply when you earn more than $87,000. (If you earn above $180,00 a year, you'll still pay 45 cents in the dollar on income above $180,000.)

Who will this affect?

Government figures suggest that this will ensure that 500,000 taxpayers don't move into the second-highest taxpayer bracket. That said, 70% of taxpayers won't see any difference as a result of the changes. The average income is $60,000 a year, well below the adjusted cut-off point.

When will the changes happen?

The changes are planned to take place from 1 July 2016, but since legislation is unlikely to be passed by Parliament before then, chances are it may have to be applied retrospectively. The Government says the changes will be in play until at least 2019-2020.

There are many other tax changes proposed, including a gradual reduction in company tax rates and new thresholds for small business, but this is the change that will affect the greatest number of workers.

Check out our full Budget 2016 guide for the other changes that will affect you.

Picture: Shutterstock

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