When will we see the tax-cut money and how much will we get?
When will we see the tax-cut money and how much will we get?

When the tax cut will be in your account

Australian workers can expect to see extra cash in their pay packets from as early as this month under tax cuts promised in the Federal budget.

Treasurer Josh Frydenberg announced the tax cuts would be brought forward in a bid to combat the coronavirus recession.

But when will we see the tax cut money and how much will we get?

The average income earner with an $80,000 salary will get around $2160 cash back for this financial year, which the Treasurer said is an effort to stimulate the economy.

Those on a $60,000 salary will get even more - around $2415 - roughly the same as those earning $100,000 or more.

Most Aussies will get around $2000 in tax cuts this year.
Most Aussies will get around $2000 in tax cuts this year.

Workers earning $150,000 or more will get a tax cut of $2430 for the financial year, while those with a salary of $40,000 should expect $1209.

"Australians will have more of their own money to spend on what matters to them, generating billions of dollars of economic activity and creating 50,000 new jobs," Mr Frydenberg said in his Budget speech.

But the payments will be split roughly in two with half being delivered through your pay from this month and the other half coming in next year's tax return.

Anyone earning less than $90,000 - the majority of Aussie workers - will get around $1080 divided up in their pay from this month and then another $1080 when they lodge their tax return next year.

A portion of the tax cut will start coming into your pay from as early as this week. You don't need to do anything to receive this portion of your tax cut.

The other half won't be seen until mid next year depending on when you do you 2021 tax return, H&R Block's director of tax communications Mark Chapman explained.

You’ll get half the money now and half later.
You’ll get half the money now and half later.

"It will be made up as a mix of payments into your salary and another payment as a lump sum in your tax return next year," he said.

Depending on if you get paid weekly, fortnightly or monthly, you could be getting your first bit of cash sometime this month as early as this week - but that depends on your employer.

Mr Chapman said "people will see the benefits in their pay packet pretty soon" but the amount will start coming in when your employer starts to apply the cuts to salary payments.

You'll see the payments paid directly into your salary as less tax paid for each pay cycle until the end of the financial year.

Aussies have an extra incentive to get their tax done next year.
Aussies have an extra incentive to get their tax done next year.

The payments are backdated from July 1 this year until about the middle of October - or until your employer starts paying the amount. This retrospective amount will be the lump sum that's paid mid-next year when you do your tax return.

"It could be four or five months of payments lumped into your tax return next year, so it might not be an exact 50-50 split," Mr Chapman added.

Aussies can expect about $20 extra a week to hit their pay packet.
Aussies can expect about $20 extra a week to hit their pay packet.

"We're in the middle of October, already a third of a way through the tax year. Because we've all been paying tax for those few months at the old rate, the ATO won't be able to catch up and factor in those payments this year, so that bit will come in as a lump sum next year," Mr Chapman explained.

He added that you won't see this lump sum until after you do your tax return next year - another incentive to get next year's tax return done in time ahead of the deadline.

The extra payments will start coming through this month.
The extra payments will start coming through this month.

The tax cut could be around $20 a week back in your pocket, depending on your income.

While the tax cut is a helping hand, it's a small amount when broken down over the year. "It's important to be aware that it will only be a slight difference in your monthly pay," Finder personal finance specialist Sophie Walsh previously told news.com.au.

"A tax cut of around $2000 looks amazing but when you divide it over the year it's a small amount."

People can check the changes to their personal income tax thresholds announced by the government during the Federal Budget which have been incorporated into the ATO's tax tables. The tables apply to payments made on and from October 13, 2020.

 

Originally published as When the tax cut will be in your account


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