Stage 3 Tax Cut – Changes You Need To Know

Accounting Made Easy

Australia’s tax landscape is set to undergo significant changes with the announcement of the Proposed Stage 3 Tax Cuts. If passed into law, these changes will come into effect from 1 July 2024. Here’s a breakdown of what’s changing:

1. Reduction in the Lower Tax Brackets:
   • The 19% tax rate will be reduced to 16% for incomes between $18,200 and $45,000.
   • The 32.5% tax rate will drop to 30% for incomes between $45,000 and the new $135,000 threshold.
2. Adjustment of Tax Thresholds:
   • The threshold for the 37% tax rate will increase from $120,000 to $135,000.
   • The threshold for the top 45% tax rate will move from $180,000 to $190,000.

With these adjustments, the Australian resident personal income tax rates from 1 July 2024 are proposed as follows:

What Does This Mean for You?

For incomes up to $150,000: You stand to benefit from the Proposed Stage 3 Tax Cuts. This is because you’ll be subject to lower tax rates at the lower income brackets, resulting in a lower tax obligation.

For incomes above $150,000: While you will still pay less tax compared to the Current Rates, the benefit from the Proposed Stage 3 Tax Cuts is relatively smaller than what the Legislated Stage 3 Tax Cuts would have offered. This is primarily due to the higher marginal tax rate of 37% starting at $135,000, as opposed to the flat 30% rate up to $180,000 in the legislated plan.

Summary of the change