How this instrument works
Australia's Personal Income Tax Plan was legislated in three stages back in 2018, with Stage 2 originally scheduled to start on 1 July 2022. The 2020-21 Federal Budget, handed down on 6 October 2020 rather than the usual May date because COVID-19 made near-term forecasting unworkable, brought Stage 2 forward by two full years and backdated it to 1 July 2020. This instrument holds an income figure fixed and runs it through both the old (2018-19) bracket schedule and the new (2020/21) one, so the reader sees exactly what bringing that stage forward changed for a given income, not an average or a headline figure.
Both schedules share the same four marginal rates — 19%, 32.5%, 37%, 45% — and the same $18,200 tax-free threshold and $180,000 top threshold; only two boundaries in the middle moved. The 32.5% bracket now starts at $45,000 rather than $37,000, and the 37% bracket now starts at $120,000 rather than $90,000. Because a bracket only taxes the slice of income sitting inside it, widening a boundary changes tax owed solely on the dollars that used to spill into the higher rate and now don't — which is why the dollar saving tracks how much income sat inside those two shifted zones, not total income by itself.
The figure this tool produces is a structural, permanent change to the bracket schedule — the kind built into every payslip's withholding for the whole year — and it is easy to confuse with the Low and Middle Income Tax Offset, a separate temporary refundable offset worth up to $1,080 for incomes between $48,000 and $90,000, paid only as a lump sum once a return was lodged. At exactly $80,000 of income the two figures happen to coincide, which is precisely the kind of overlap that muddies public claims about 'the $1,080 tax cut.' This sheet isolates the bracket effect alone; it carries no Medicare Levy, no Low Income Tax Offset, and no LMITO.
- Enter your figure into Annual taxable income, AUD — income after allowable deductions, not gross salary before deductions.
- Read Tax under the pre-2020/21 brackets to see what that same income would have owed under the 2018-19 schedule.
- Read Tax under the 2020/21 Budget (Stage 2) brackets for the amount owed under the widened schedule instead.
- Check Tax cut from the 2020/21 Budget, the difference between the two — the saving from wider brackets alone.
- Move the income up or down to see where the cut grows, where it flattens out, and where it disappears entirely.
Worked example — $80,000 of taxable income
Take the reference case: $80,000 of annual taxable income, AUD. Under the pre-2020/21 schedule the first $18,200 is untaxed, the next $18,800 up to $37,000 sits in the 19% bracket for $3,572, and the remaining $43,000 up to $80,000 falls inside the 32.5% bracket for a further $13,975 — an old-schedule total of $17,547, exactly what Tax under the pre-2020/21 brackets reads.
Run the same $80,000 through the widened 2020/21 Budget brackets instead: the 19% band now reaches $45,000, so $26,800 of income is taxed at 19% for $5,092, and the remaining $35,000 up to $80,000 stays inside the 32.5% bracket, still well under its new $120,000 ceiling, for $11,375 — a new-schedule total of $16,467. Subtract that from $17,547 and Tax cut from the 2020/21 Budget reads exactly $1,080, earned entirely because more of the same $80,000 sat inside the lower 19% and 32.5% rates for longer.
Questions
Why is there no tax cut at all for incomes at or below $37,000?
Both schedules tax income up to $37,000 identically. The first $18,200 is tax-free and everything from there to $37,000 sits in the 19% bracket under the old and new structure alike, since the Budget only widened the higher brackets above that point. Tax under the pre-2020/21 brackets and Tax under the 2020/21 Budget (Stage 2) brackets return the same figure below $37,000, so Tax cut from the 2020/21 Budget stays at $0.
Is this the same as the $1,080 Low and Middle Income Tax Offset?
No, even though the two can land on the same number by coincidence. The $1,080 this instrument shows at $80,000 of income is a permanent change to the bracket schedule, built into every payslip's withholding all year. LMITO was a separate, temporary refundable offset worth up to $1,080 for incomes between $48,000 and $90,000, paid only as a lump sum when the 2020-21 return was lodged, not through the bracket structure this tool models.
Does the tax cut keep growing the higher the income goes?
It grows only up to $180,000 and then plateaus. Above that line both schedules apply the same 45% rate to every extra dollar, and that identical term cancels out of the subtraction, so the cut stops increasing. It settles at $2,430 for any taxable income at or above $180,000 — the fixed dollar gap the widened 32.5% and 37% bands produce below that threshold.
Does this include the Medicare Levy or other tax offsets?
No. This instrument isolates only the four marginal income-tax brackets and their rates. It excludes the 2% Medicare Levy, the Low Income Tax Offset, and any Medicare Levy Surcharge, all of which sit alongside the bracket tax and change the amount actually withheld from a payslip or owed on assessment. Treat oldTax and newTax as bracket-only figures, not a full tax bill.
Who actually needs to compare old and new brackets like this?
Payroll staff reconciling why take-home pay changed after the October 2020 Budget, employees checking a stated tax cut against their own income, and anyone fact-checking a news claim that quotes a dollar figure without saying whether it comes from the bracket change or from a separate offset. The comparison isolates the bracket effect cleanly, so it can be checked against other numbers on their own terms.
Why was the 2020-21 Budget delivered in October instead of May?
The government delayed the usual May date to 6 October 2020 because the pandemic made near-term economic forecasting unworkable at the normal time. Despite the late delivery, the Stage 2 brackets modeled here were backdated to 1 July 2020, so the wider thresholds applied to the entire 2020-21 income year rather than starting only from October.
References
- Australian Taxation Office — Individual income tax rates
- Australian Government — Federal Budget papers and archive
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.