House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Scott Morrison MP)

General outline and financial impact

Income tax relief

This Bill amends the Income Tax Rates Act 1986 (ITRA 1986) to increase the third personal income tax threshold applying to personal income taxpayers. Taxpayers earning above $80,000 will now face a lower rate of tax from $80,001 to $87,000.

This change will help to achieve a better tax system that supports Australians to work, save and invest.

Date of effect: This measure applies to the 2016-17 income year and later years.

Proposal announced: This measure was announced in the 2016-17 Budget.

Financial impact: This measure was announced in the 2016-17 Budget with the following revenue impact ($ millions):

The Australian Taxation Office (ATO) will issue new income tax withholding schedules once the Commissioner of Taxation (Commissioner) is confident that Parliament will pass these amendments. However, as these new withholding schedules will not apply until after the 2016-17 income year has started, some of the revenue impacts for the 2016-17 income year will be deferred until 2017-18 when taxpayer assessments are finalised and any overpaid income tax is refunded. That said, this deferral will not affect the total cost of the measure over the forward estimates.

Human rights implications: This Bill does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 2, paragraphs 2.1 to 2.4.

Compliance cost impact: This measure will have no effect on compliance costs because it is a modification of the currently applicable tax schedule.