Every Australian taxpayer stands to benefit, but the extent of the improvement remains uncertain.
The Labour Government is fulfilling its election commitment to implement Stage 3 tax cuts, albeit with adjusted rates.
Low- and middle-income earners can anticipate a more substantial tax cut than initially pledged, while higher-income earners will experience a reduced reduction.
What does this mean for you?
Keep more money in your pocket with reduced tax deductions on your weekly, fortnightly or monthly wages. The government plans to slash the low tax rate, resulting in a new 16% tax for workers earning less than $45,000, down from the previous 19%.
Originally, under Stage 3, a single 30 % rate was to apply between $45,000 and $200,000. What the government is proposing that this rate apply between $45,000 and $135,000.
The existing 37% rate, which Stage 3 was to abolish, would instead be retained, applying between $135,000 and $190,000.
The top rate of 45% would remain for incomes above that level.
Anyone who earns up to about $150,000 would still be better off than under Stage 3.
But those above this level would get a smaller tax cut than expected.
Those who earn above $200,000 — totalling less than 5 % of taxpayers — would see their tax cut halved, from $9,075 to $4,529.
The government will also exempt some low-income earners from the Medicare levy, that is for those who earn below $24,276.
In summary
- Lower the 19% tax rate to 16% (for $18,200 & $45,000 income earners)
- Lower the 32.5% tax rate to 30% ($45,000 & the new $135,000 threshold income earners)
- Increase the 37% tax rate threshold from $120,000 to $135,000
- Increase the 45% tax rate threshold from $180,000 to $190,000
New personal tax rates and thresholds for 2024–25
Thresholds in 2023–24 ($) | Rates in 2023–24 (%) | New thresholds in 2024–25 ($) | New rates in 2024–25 (%) |
0 – 18,200 | Tax-free | 0 – 18,200 | Tax free |
18,201 – 45,000 | 19 | 18,201 – 45,000 | 16 |
45,001 – 120,000 | 32.5 | 45,001 – 135,000 | 30 |
120,001 – 180,000 | 37 | 135,001 – 190,000 | 37 |
>180,000 | 45 | >190,000 | 45 |
The tax effect
The lower-income taxpayers will be better off by at least $804. Where taxpayers on approximately $150,000 will still be better off however not as much as originally promised.
When do the Stage 3 tax cuts start?
Effective 1st July 2024.
