Australia 2020/21 Budget Tax Cuts Calculator
The October 2020 federal budget brought forward Stage 2 of the Morrison Government tax plan by two years, cutting income tax for every Australian earning above $18,200. This calculator compares your 2019-20 and 2020-21 tax liability, shows how much you save, and breaks down the Low Income Tax Offset (LITO) and Low and Middle Income Tax Offset (LMITO) that apply to both years.
What changed in the 2020-21 Federal Budget
Treasurer Josh Frydenberg handed down the 2020-21 budget on 6 October 2020, announcing that Stage 2 of the Morrison Government tax plan would take effect immediately from 1 July 2020, two years ahead of the original schedule. The two most significant bracket changes were the top of the 19% bracket rising from $37,000 to $45,000 and the top of the 32.5% bracket rising from $90,000 to $120,000. Together these mean anyone earning between $37,001 and $120,000 pays less tax on those dollars than they did in 2019-20. The Low Income Tax Offset was also lifted from $445 to $700, giving extra relief to lower earners. The Low and Middle Income Tax Offset of up to $1,080 was retained for 2020-21 (it remained available through 2021-22 before being removed). The government estimated the package would return around $12.5 billion to workers in its first year.
Who benefits most, and how much
The size of your saving depends on where your income sits relative to the changed thresholds. If you earn less than $18,200, you pay no income tax under either year and save nothing. Between $18,201 and $37,000, only the LITO increase from $445 to $700 applies, saving you up to $255. The biggest proportional gains go to incomes between $37,001 and $120,000: the widened 19% bracket saves up to $1,521 on its own, and the extended 32.5% bracket saves another $1,125 at $120,000. At $120,000 the total saving peaks at around $2,745 per year ($52.79 per week). Above $120,000 the rate and bracket structure is unchanged, so the saving stays flat at around $2,745. Above $126,000 the LMITO phases out, but the bracket saving continues. The headline maximum tax cut from Stage 2 alone (excluding LMITO) is approximately $2,565 for incomes at or above $120,000.
LITO and LMITO explained
Two non-refundable tax offsets sit on top of the bracket structure. The Low Income Tax Offset (LITO) was increased from $445 to $700 for 2020-21. It applies in full up to $37,500, then phases out at 5 cents per dollar between $37,501 and $45,000, and then at 1.5 cents per dollar between $45,001 and $66,667. The Low and Middle Income Tax Offset (LMITO) was introduced in 2018-19 and peaked at $1,080 for incomes between $48,001 and $90,000. It phases in from $255 at $37,001 and phases out completely at $126,000. The LMITO was only available in your tax return after lodging, not as a reduction to weekly withholding, so many workers saw a lump-sum refund at tax time. Both offsets are non-refundable, meaning they can reduce your tax to zero but cannot generate a cash refund on their own.
How to use this calculator
Enter your annual taxable income for 2020-21. This is your gross income less any deductions you claim such as work-related expenses, self-education costs, or investment losses. The calculator applies the correct 2020-21 brackets, LITO, and LMITO, and compares the result with your 2019-20 tax under the previous rates to show your saving. Toggle the Medicare levy switch to include or exclude the standard 2% levy. If you are part of a couple, switch to the Couple mode, enter both incomes, and the calculator shows each individual saving plus your combined household benefit. The marginal rate and effective rate outputs help you understand the difference between the rate on your last dollar earned and the average rate across your whole income.
2020-21 Australian income tax brackets
| Taxable income | Rate | Tax on this bracket | Change from 2019-20 |
|---|---|---|---|
| $0 - $18,200 | 0% | $0 | No change |
| $18,201 - $45,000 | 19% | $5,092 max | Upper limit up from $37,000 |
| $45,001 - $120,000 | 32.5% | $24,375 max | Upper limit up from $90,000 |
| $120,001 - $180,000 | 37% | $22,200 max | No change |
| $180,001+ | 45% | No cap | No change |
Stage 2 brackets brought forward by the October 2020 budget. Medicare levy (2%) applies separately. Offsets (LITO, LMITO) reduce tax payable after these rates are applied.
Frequently asked questions
How much did the 2020-21 budget tax cuts save the average worker?
The amount depends on income. A worker on $80,000 saved about $1,080 per year versus 2019-20, while someone on $120,000 saved around $2,745. Below $18,200 there is no change (no tax is owed either year), and above $120,000 the saving is capped at roughly $2,745 because the bracket structure above that threshold was unchanged. The government estimated the total across all workers at about $12.5 billion in the first year.
What were the old tax brackets before the 2020-21 budget?
Under 2019-20 rates, the 19% bracket ran from $18,201 to $37,000 and the 32.5% bracket ran from $37,001 to $90,000. The 2020-21 budget pushed the top of the 19% bracket up to $45,000 and the top of the 32.5% bracket up to $120,000. Rates above $120,000 (37% and 45%) were not changed in Stage 2.
Is the LMITO included in this calculator, and do I still get it?
Yes. The LMITO is included in both the 2019-20 and 2020-21 calculations because it applied in both years. For 2020-21 the maximum LMITO is $1,080 for incomes between $48,001 and $90,000, phasing in from $255 at $37,001 and phasing out to zero at $126,000. Unlike the bracket savings (which reduced weekly withholding automatically), the LMITO is applied when you lodge your tax return. It was finally removed after the 2021-22 year.
Does this calculator include the Medicare levy?
You can toggle the Medicare levy on or off. When it is on, the standard 2% levy is added above the low-income threshold ($22,801 for 2020-21 for individuals), with a shade-in for incomes just above the threshold. The levy itself was not changed by the 2020-21 budget, so it appears in both the before and after figures and does not affect your saving.
My employer did not change my withholding after the October 2020 budget. Is that correct?
Partly. The ATO updated the withholding tax tables from the start of the 2020-21 financial year (1 July 2020) to reflect the new brackets, so a portion of the saving was delivered through reduced withholding during the year. However, the LMITO is not reflected in weekly withholding, so that component arrives as a refund (or reduced tax bill) when you lodge your return. If you started a new job mid-year or had unusual circumstances, your withholding may not have been adjusted, in which case you would receive the full saving as a refund after lodging.
Are Stage 3 tax cuts included in this calculator?
No. This calculator focuses specifically on the Stage 2 changes announced in the October 2020 budget and compares them with the prior 2019-20 tax rates. The Stage 3 cuts (which collapsed the 32.5% and 37% brackets into a flat 30% from $45,001 to $200,000) were originally legislated to start in 2024-25 but were later amended by the Albanese government. They are a separate calculation.