HOW TO CLAIM YOUR TAX BONUS

FROM next week 10 million Aussies and 2.2 million Queenslanders will get an extra $1080 back when they fill out their tax returns.

But the reform passed by the Senate is not just about this year, it sets out changes over five years to permanently reduce how much tax almost all Aussies will pay. How much someone gets back and when they get it depends on how much they earn and at what year it is. The tax cuts will be phased in over three stages. There will be an immediate cut from this week, with some changes from July 1, 2022, and a final reform from July 1, 2024.

WHAT YOU’LL BE GETTING THIS YEAR

If you file your tax return from next week, you will get the full tax cut you are eligible for once it’s been processed. People earning $48,000 to $94,500 will receive the full $1080 available. Outside of that, it starts to differ.

It rises up from $255 for people earning $22,000 a year, and scales down to $135 for people earning between $94,500 and $126,400.

Everyone earning above $87,000 will pay $135 less tax due to a slight increase in the middle-income tax threshold already legislated last year.

WHAT’S NEXT?

The next big change kicks in from July 1, 2022, locking in the offsets from this year but shifting bracket thresholds.

The 19 per cent tax bracket rises from $37,000 to $45,000, while the 32.5 per cent tax bracket rises from $90,000 to $120,000.

In most cases, what this practically means is that the tax offsets you receive this year are made permanent.

So, if you received a $1080 offset, you will keep getting it. Same for if you were getting

$255 back and so on. But, if you are earning more than $90,000, because the threshold will be lifted, you will get up to $2565 for workers earning $120,000. After that, it doesn’t matter what you earn, you will only pay $2565 less income tax.

WHAT HAPPENS IN FIVE YEARS?

Stage 3 is the final and biggest part of the reform package, costing $95 billion and coming in from July 1, 2024.

It sees the 37 per cent tax bracket abolished entirely and the 32.5 per cent rate dropped to just 30 per cent. It means that anyone earning between $45,000 and $200,000 will pay a maximum 30c tax on every dollar they earn.

This accounts for 70 per cent of Australian taxpayers. The idea is that, as your pay goes up, you are not forced on to a higher tax bracket. The threshold changes and reduced tax rate mean everyone will pay less tax than they do today.

Someone earning $45,000 will pay $1080 less tax, a salary of $100,000 will attract $3040 less tax, increasing up to $11,640 for people earning $200,000 and above.

WHY DID LABOR, GREENS AND ONE NATION FIGHT AGAINST THE PACKAGE?

Despite Labor heading into the election proposing higher taxes, new Opposition Leader Anthony Albanese argued Stage 2 should be brought forward immediately, as well as additional infrastructure spending, to stimulate the economy ahead of a predicted downturn.

Labor also wanted a vote on Stage 3 delayed, saying it was too far in the future to decide now and questioning the impact its $95 billion price tag would have on services like health and education.

The Greens opposed the tax package in general, arguing the cuts could be better spent on social services, increasing Newstart and on renewable energy.

Pauline Hanson ruled herself out of negotiations early, saying the money would be better spent on building a new coalfired power station and water infrastructure.

WHICH CROSSBENCHERS BACKED IT AND WHY?

Cory Bernardi supported the tax cuts from day one. Centre Alliance senators Stirling Griff and Rex Patrick came on board next after seeking action on energy prices and gas market concerns.

Jacqui Lambie was the last crossbench vote secured after seeking $157 million in social housing debt waived for the Tasmania Government.