Budget 2020 income tax cuts: It’s time to update your payroll, ATO says

The Australian Taxation Office has updated its tax withholding schedules, to reflect the personal tax cuts announced in this year’s federal budget.

The tax cuts apply to the 2020-21 financial year and passed in parliament last week.

Now, employers must make adjustments in their payroll systems to ensure the changes are correctly reflected in employees’ pay packets.

Businesses have until November 16, 2020, to implement the changes into their payroll.

But, the changes will apply to all payments made from October 13.

The ATO noted in its announcement that implementing the change may be more complex for some businesses than others.

“As such, some employees may notice the tax cuts reflected in their take-home pay within a few days or weeks, while for others it may be longer,” the statement said.

“Any withholding on the old scales will be taken into account in the employee’s tax return.”

Businesses can access updated schedules and a tax withholding calculator here.

The updated information follows a tax cut for some 11 million Aussies, announced in this year’s federal budget, which is backdated to July 1 this year.

Lower- and middle-income earners will get a backdated cut of up to $2,745 for singles, and up to $5,490 for dual-income families, compared to 2017-18.

While employees won’t get refunds, per se, for tax already paid this year, their annual contribution will be evened out through reduced tax withholding via payroll deductions, for the rest of the financial year.

The tax cuts are intended to “put more money into the pockets of hard-working Australians and their families,” Treasurer Josh Frydenberg said in the budget speech on October 6.

“Australians will have more of their own money to spend on what matters to them, generating billions of dollars of economic activity.”

NOW READ: The government wants to bring forward income tax cuts, but will that actually stimulate the economy?

NOW READ: After a “tumultuous” year, Melbourne’s Naught Distillery says the federal budget will help it achieve its original vision