The deadline for employers to ensure staff members are taxed at the Government’s new reduced rate is fast approaching. As of November 16th, the $17.8 billion tax cuts must be accounted for in payroll procedures, meaning you will likely see a nice little bump to the funds you take home very soon.
Yahoo Finance estimates that this shift could see Aussie employees walk away with up to an additional $47 per week. That’s a lot of smashed avos, people.
While this is undoubtedly exciting news for many, especially when you consider how soon the change is being implemented, it is worth pointing out that not everyone will reap these benefits right away.
The November 16th cut off is promising, yes. But as H&R Block tax communications director Mark Chapman told Yahoo Finance, the speed at which you see this tax change will depend on a couple of factors. He explained to the outlet that your pay structure (monthly pay cycles may take longer to update) and the responsiveness of the business you work for could delay things.
In the case that you do not see the tax cuts you’re expecting (we’ve detailed the break down below) it’s recommended you speak with your employer or payroll department right away.
If You’d Like A Refresher:
In early October, Treasurer Josh Frydenberg revealed Australia’s 2020 Federal Budget. As well as announcing benefits for first home buyers, tradies, road and rail users, small businesses and more, Frydenberg announced immediate tax cuts for much of Australia.
2020 Federal Budget Tax Cuts
The Budget states that workers earning between $50,000 and $90,000 will receive an extra $1,080 in 2020-21 as an extension of the low and middle income tax offset that was introduced last year.
People earning more than $120,000, on the other hand, will receive the biggest benefit with a permanent tax cut of $2,565 in 2020-21 and beyond.
The government is also looking at removing the 37% tax rate, so anyone earning between $45,000 and $200,000 only pays 30% tax.
The purpose of these tax cuts is to encourage Australians to spend their money, boosting the country’s economy that’s suffering as a result of the COVID-19 pandemic.
— Josh Frydenberg (@JoshFrydenberg) October 6, 2020
When Will Australians Receive The Money?
These tax cuts, which were due to begin in July 2022, have not only been backdated to this financial year and brought forward, but they’ve been ‘turbocharged’ for the rest of the year to catch up on the missing weeks since July 1.
According to News.com.au, the Budget’s fine print actually states that those earning less than $90,000 will get $1,080 now and another $1,080 when they lodge their tax return. Because these payments have been backdated, the $1,080 refund will likely increase by about $300 for most workers.
However, those earning over $100,000 will get their full $2,565 upfront and won’t have to wait.
Once the Budget is passed by Parliament, the Australian Taxation Office (ATO) can get the ball rolling and while there’s no confirmed start date on these tax cuts – it’s expected to happen just in time for Christmas.
— The Advertiser (@theTiser) October 6, 2020
How Do You Access These Tax Cuts?
Once passed, the ATO will adjust its tax threshold schedule – the brackets that determine how much tax your employers sets aside for the government. Employers will receive these, update accounting and payroll systems and the tax cuts will begin to roll out.
News.com.au reports that when it comes to backdated tax cuts, most workers in Australia will be eligible for a refund for the amount overpaid during tax return time next June.
This story has been updated since its original publication.