Income Tax Cuts Calculator - Australia Federal Budget 2020/21

Compares Australian resident (or foreign resident) income tax under the pre-2020 brackets and the 2020-21 Budget's Stage 2 brackets, plus the Low and Middle Income Tax Offset (LMITO), to estimate the size of your tax cut.

Quick Facts

2020-21 resident brackets
19% to $45,000, 32.5% to $120,000
Stage 2 tax cuts were brought forward from a legislated 1 July 2022 start to apply from 1 July 2020.
LMITO
Up to $1,080
Applies to residents with taxable income up to $126,000; phases out above $90,000.
Tax-free threshold
$18,200
Available to residents only — foreign residents are taxed from the first dollar.

Your Results

Calculated
Tax under old brackets
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Pre-2020-21 Budget scale
Tax under 2020-21 brackets
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After Budget brackets, less LMITO if selected
Total tax cut
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Old tax minus new tax
Tax cut as % of income
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Saving relative to taxable income

Ready

Enter your taxable income, residency status, and whether to include LMITO, then press Calculate.

How the Income Tax Cuts Calculator - Australia Federal Budget 2020/21 works

In the 2020-21 Federal Budget, the Australian Government brought forward "Stage 2" of its long-term personal income tax plan — originally legislated to start on 1 July 2022 — so it applied retroactively from 1 July 2020. This raised the ceiling of the 19% bracket from $37,000 to $45,000 and the ceiling of the 32.5% bracket from $90,000 to $120,000. The Budget also retained the Low and Middle Income Tax Offset (LMITO) for the 2020-21 income year. This calculator estimates the dollar value of those changes by computing income tax on the same taxable income under both sets of brackets, using the Australian Taxation Office's published resident and foreign-resident rate scales.

The formula

Each rate scale is a set of marginal brackets. Tax on an income that falls in a given bracket equals the accumulated tax on all lower brackets plus the bracket's rate applied to the amount above its floor: tax = base + rate × (income − bracket floor).

Pre-2020 resident brackets (2019-20): $0–$18,200: nil · $18,201–$37,000: 19% · $37,001–$90,000: 32.5% (base $3,572) · $90,001–$180,000: 37% (base $20,797) · above $180,000: 45% (base $54,097).

2020-21 Budget resident brackets (Stage 2): $0–$18,200: nil · $18,201–$45,000: 19% · $45,001–$120,000: 32.5% (base $5,092) · $120,001–$180,000: 37% (base $29,467) · above $180,000: 45% (base $51,667).

Foreign residents get no tax-free threshold: the pre-2020 scale taxes them at 32.5% up to $90,000, while the 2020-21 scale extends that 32.5% band to $120,000, mirroring the resident bracket shift.

If LMITO is included, the calculator subtracts it from the 2020-21 tax figure: $255 up to $37,000, rising 7.5 cents per dollar to a maximum $1,080 at $48,000, holding at $1,080 to $90,000, then falling 3 cents per dollar to zero at $126,000. The total tax cut is the pre-2020 tax minus the final 2020-21 tax (after any LMITO).

Worked example

For a resident with $90,000 of taxable income: tax under the pre-2020 brackets is $3,572 + 32.5% × ($90,000 − $37,000) = $20,797. Tax under the 2020-21 brackets is $5,092 + 32.5% × ($90,000 − $45,000) = $19,717, and LMITO at this income is the maximum $1,080, so the final 2020-21 tax is $18,637. The total tax cut is $20,797 − $18,637 = $2,160, about 2.4% of taxable income — $1,080 from the bracket shift and $1,080 from LMITO.

Assumptions and limits

  • This is federal personal income tax only. It excludes the 2% Medicare levy, the Medicare levy surcharge, HECS-HELP repayments, and offsets other than LMITO.
  • It uses the general resident and foreign-resident rate scales; it does not model working holiday maker rates or minors' unearned-income rules.
  • LMITO applies to residents only and is calculated on taxable income exactly as entered — it does not adjust for part-year residency.

Frequently Asked Questions

How is the Australia income tax cut calculated?
The calculator computes tax on your taxable income twice using the Australian Taxation Office's published resident (or foreign resident) rate scales: once using the brackets that applied before the 2020-21 Federal Budget, and once using the Stage 2 brackets the Budget brought forward to 1 July 2020. It then subtracts the Low and Middle Income Tax Offset (LMITO), if selected, from the new-bracket figure. The tax cut is the old-bracket tax minus the final new-bracket tax.
What is the Low and Middle Income Tax Offset (LMITO)?
LMITO is a once-a-year offset for Australian resident taxpayers that reduces tax payable after it is assessed. For 2020-21 it was $255 for taxable income up to $37,000, rising by 7.5 cents per dollar to a maximum of $1,080 at $48,000, staying at $1,080 up to $90,000, then phasing out at 3 cents per dollar until it reaches zero at $126,000. It only applies to residents.
Does this include the Medicare levy?
No. This calculator only compares the marginal income tax brackets and the LMITO offset. It does not add the 2% Medicare levy, the Medicare levy surcharge, HECS-HELP repayments, or any other offsets and deductions, so your actual net tax position will differ from the figures shown here.
What changes for a foreign resident?
Foreign residents do not get the tax-free threshold or LMITO. Under the pre-2020 scale, foreign residents paid 32.5% up to $90,000; under the 2020-21 Budget scale, that 32.5% band was extended to $120,000, matching the shift applied to the resident brackets. Select "Foreign resident" to use these rates.

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