Tax cuts slated to be introduced in 2022 will be brought forward and backdated to the start of this financial year, a move the government says will put $12.5 billion back into the economy.
Widely expected, the proposed acceleration of the previously legislated tax plan won't bring forward the changes slated for 2024, avoiding a political fight in the Senate.
The threshold for the 19 per cent tax rate will be raised from $37,000 to $45,000 and the 32.5 per cent threshold lifted from $90,000 to $120,000.
Backdating the changes will boost take home pay as soon as the legislation is passed, with taxes already paid to be included in tax returns next year for more than 11 million people.
As well as the tax cuts, the offsets for low and middle income earners will stay in place for another year.
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The low income tax offset will increase from $445 to $700 this financial year and paid at a rate of 5 cents per dollar of taxable incomes between $37,500 and $45,000. The low income tax offset will be paid at a rate of 1.5 cents per dollar of taxable incomes between $45,000 and $66,667.
The low to medium tax offset of up to $1080 for those earning up to $90,000 will stay in place, adding to cash returned at the end of the financial year.
Treasurer Josh Frydenberg said the changes would mean more than 7 million Australians would get tax relief of $2000 or more this financial year.
For someone earning $40,000 a year, their tax liability will drop $1060 on 2017-18 levels to $3887.
High earners will see bigger amounts back in their pockets, with someone earning $120,000 to receive a $2745 boost, and those on $200,000 a $2565 boost.
But the government has made clear the change in tax for lower income earners is a larger change in tax liability by percentage, than those who are well off.
The change in tax liability for someone on $40,000 a year is a 21.4 per cent drop, while for someone on $200,000 it's a 3.8 per cent decrease.
"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 address.
"It will help local businesses to keep their doors open and hire more staff."
For dual income families on low to middle incomes, they will pay up to $5490 in tax than in 2017-18, while a single person on a low to middle income will get up to $2745 back.
It's forecast the changes will reduce tax receipts by $17.8 billion over the forward estimates. Tax cuts for those on high incomes have been criticised as a form of stimulus in some corners, with those on higher incomes more likely to save rather than spend the extra funds.
But the government has said it won't tell people how to spend their money.
Sally Whyte
I report on a range of issues in federal politics and the public service, with a real passion for how decisions made in Canberra affect the lives of Australians.
I report on a range of issues in federal politics and the public service, with a real passion for how decisions made in Canberra affect the lives of Australians.
