For the first time in nine years, there were no changes to the personal income tax rates and thresholds. This means the 2010/11 rates and thresholds will apply in 2011/12 as tabled below.

Taxable income range

Tax payablein 2011/12 (excluding Medicare)

$0 – $6,000


$6,001 – $37,000

15% on amount over $6,000

$37,001 – $80,000

$4,650 + 30% on amount over $37,000

$80,001 – $180,000

$17,550 + 37% on amount over $80,000

$180,001 +

$54,550 + 45% on amount over $180,000


removal of low income tax offset for under 18s

Date of effect: 1 July 2011

Children under the age of 18 will no longer be able to access the low income tax offset (LITO) to reduce tax payable on unearned income such as dividends, interest and rent.

This measure won’t impact income earned by children from work, unearned income of orphaned or disabled children and compensation payments and inheritances received by children.

This measure will reduce the attractiveness of investing on behalf of minors or making trust distributions to minors. This is because currently it’s possible for a minor to receive a maximum tax-free income of $3,333 pa when the low income tax offset is taken into account.
However from 1 July 2011, unearned income will be taxed as follows:

Unearned income

Tax payable

$0 – $416


$417 – $1,307

66% of excess over $416

$1,308 +

45% of entire unearned income


changes to distribution of low income tax offset

Date of effect: 1 July 2011

Lower income earners will be taxed less during the financial year, rather than being compensated after their tax return is filed.

This change will be delivered by increasing the proportion of the Low Income Tax Offset (LITO) delivered to lower income earners via their regular pay packets from 50% to 70%.

For example, someone with an annual income of $30,000 will pay $300 less tax during the financial year, rather than receiving an additional tax refund of $300 at tax time.

In other words, this measure impacts the timing of the LITO benefit, not the actual benefit amount received.

This measure won’t impact:

dependant spouse tax offset phase out

Date of effect: 1 July 2011

The dependant spouse tax offset will no longer be available for spouses born after 30 June 1971. Certain exceptions will apply, including where the spouse is an invalid or permanently disabled. The maximum offset is currently $2,243 pa.

reduction in GDP adjustment factor for PAYG instalments

Date of effect: 1 July 2011

The Gross Domestic Product (GDP) adjustment factor for Pay-as-you-go (PAYG) instalment taxpayers who use the GDP adjustment method in 2011/12 will reduce from 8% to 4%.

The GDP adjustment factor for PAYG instalment taxpayers is used to determine the tax instalments to be paid in the income year by increasing the previous year’s adjusted taxable income by the previous year’s nominal GDP growth. This method is commonly used by small businesses, individual investors and self managed super funds.

CGT relief when principal residence held by estate

Date of effect: Not specified

The ATO will have discretion to extend the two-year ownership period in which the trustee of a deceased estate or beneficiary of such an estate must dispose of their interest in the deceased’s dwelling to access a full capital gains tax main residence exemption, or a more generous partial exemption.

reduced HECS discounts

Date of effect: 1 January 2012

For payments made under the Higher Education Contribution Scheme (HECS):

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more information?

For more information on how any of these changes may impact your personal situation, please contact us on
07 3833 3999.

The information contained in this Federal Budget Analysis is current as at 11 May 2011 and is prepared by MLC Technical, a division of GWM Adviser Services Limited ABN 96 002 071749, registered office 105-153 Miller Street North Sydney NSW 2060. This company is a Australia Financial Services Licensee and member of the National Australia group of companies. Any advice in this communication has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on any advice, consider whether it is appropriate to your objectives, financial situation and needs.