Yahoo Finance 2.2 million Aussies to benefit from major tax change
Millions of Australians are set to benefit from the suspension of the indexation of tax instalment amounts for the 2020-21 financial year, after a new announcement from assistant treasurer Michael Sukkar.
Sukkar said the change would affect instalments payable to the Australian Taxation Office (ATO) for around 2.2 million taxpayers paying Pay As You Go (PAYG) income tax instalments, and around 81,000 taxpayers paying Goods and Services Tax (GST) instalments in 2020-21.
“The decision to suspend the indexation of tax instalments is yet another tangible way the Morrison Government is supporting Australians as we respond to the COVID-19 health crisis,” Sukkar stated.
“Tax instalments help spread taxpayer obligations over the year and to reduce a taxpayers’ balance on assessment.”
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Historically, GDP outcomes dictate the indexation of instalment amounts annually, to reflect income growth, but given the impact of the coronavirus, the government has chosen to suspend indexation entirely.
In addition, taxpayers can still vary their instalment amounts if they believe they will pay too much tax this year, according to Sukkar.
“Other taxpayers who pay instalments based on their current income are not subject to indexation because their instalments already adjust to changes in income,” the assistant treasurer stated.
“While these taxpayers are not affected by the suspension of indexation, they have the same right to vary their instalments.”
Taxpayers who don’t pay GST by instalments won’t be affected.
CPA Australia tax policy adviser Elinor Kasapidis told Accountants Daily this would hugely benefit small businesses, sole traders and recipients of business and investment income.
“We expect that from September this year, the ATO-calculated quarterly instalment amounts will be 25 per cent of the most recent annual tax or GST liability,” Kasapidis said.
“For many, this will be based on the amount on their 2018–19 return until they lodge their 2019–20 tax return.”
Kasapidis warned taxpayers should be cautious that the suspension could result in underpayment of instalments, which would leave them with a larger tax liability when they lodge their tax return next year.
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