Synectic tax adviser discusses middle income tax relief

Federal Budget delivers tax relief for middle income earners

An increase in the middle tax bracket from $80,000 to $87,000 is long overdue and works to overcome the significant bracket creep issues of recent years.

 Gareth Atkins, Synectic

From 1 July 2016, the government will increase the 32.5% personal income tax threshold from $80,000 to $87,000.

This measure will reduce the marginal rate of tax on incomes between $80,000 and $87,000 from 37% to 32.5%. It will prevent around 500,000 average full-time wage earners from moving into the 37% marginal tax rate (the second highest tax bracket in Australia).

In real terms this means that, for those earning $87,000 a year, the tax saving from moving into the lower tax bracket will be $321 a year. While this $6 per week saving is not huge it does go some way towards combating bracket creep. We wrote about tax bracket creep back in November 2015 and are happy to see the issue being at least partially addressed with this measure.

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