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The Rudd Government's third round of tax cuts will take effect from 1 July 2010. The rates for resident individuals are as follows:
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Taxable income
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Marginal rate*
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Tax on this income
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$0 – $6,000
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Nil
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Nil
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$6,001 – $37,000
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15%
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15c for each $1 over $6,000
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$37,001 – $80,000
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30%
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$4,650 plus 30c for each $1 over $37,000
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$80,001 – $180,000
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37%
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$17,550 plus 37c for each $1 over $80,000
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$180,001 and over
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45%
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$54,550 plus 45c for each $1 over $180,000
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From 1 July 2010 the Low Income Tax Offset will increase from $1,350 to $1,500. The increase means Australians can earn up to $16,000 without having to pay income tax.
Senior Australian eligible for the Senior Australian Tax Offset can earn $30,685 for singles (increased from $29,867), and $26,680 for each member of a couple (increased from $25,680), before they pay income tax or the Medicare Levy.
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The Medicare Levy low-income threshold will increase to $18,488 (from $17,794) for singles, and to $31,196 (from $30,025) for couples. This means that singles or couples with incomes in the 2009-10 income year below these new thresholds will be exempt from the Medicare Levy.
For families, the additional amount of threshold for each dependent child or student will also be increased to $2,865 (up from $2,757).
The Medicare Levy low-income threshold for pensioners below Age Pension age will increase to $27,697 (from $25,299) for the 2009-10 income year. This means that a pensioner below Age Pension age with an income in 2009-10 below this new threshold will be exempt from the Medicare Levy.
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The Government has announced that it will cap the annual Child Care Rebate will be $7,500 per child (reduced from $7,778 per child). However, the Government states that the reduction in the Rebate will not alter the percentage of out-of-pocket expenses reimbursed by the Commonwealth. The Government has also announced that it will pause the indexation of the cap for 4 years.
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The medical expenses rebate threshold will increase from $1,500 to $2,000 from 1 July 2010.
Taxpayers presently receive a rebate equal to 20% of net unreimbursed eligible medical expenses above $1,500. The threshold will increase from $1,500 to $2,000 and commence annually indexing the threshold to the Consumer Price Index. The first indexation adjustment to the threshold will take place on 1 July 2011.
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From 1 July 2011, the Government will provide individuals with a 50% tax discount on up to $1,000 of interest earned, including interest earned on deposits held with any bank, building society or credit union, bonds, debentures or annuity products.
This means that for a person earning an average pre-tax interest rate of 6%, the discount would apply up to a savings balance of just over $16,500.
Taxpayers claiming the discount for interest income will have a reduced adjusted taxable income for the purpose of determining eligibility for transfer payments, such as Family Tax Benefit, Baby Bonus, Child Care Benefit, Education Tax Refund and Commonwealth Seniors Health Card.
The Treasurer noted a standard tax deduction was recommended by the Henry Tax Report.
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From 1 July 2012 the Government will provide individual taxpayers with an optional standard deduction of $500 in lieu of claiming work-related expenses and the cost of managing their tax affairs. The standard deduction will be increased to $1,000 from 1 July 2013.
No taxpayers will be disadvantaged. Taxpayers with expenses above the standard deduction will be able to continue to claim those expenses when lodging their tax return under the existing rules.
However, contrary to media speculation, there is no announcement in the Budget about removing the requirement to lodge a tax return by persons with "simple" tax affairs.
The Treasurer noted that this announcement is in response to the Henry Tax Report recommendation to provide a tax discount on interest income from savings.
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