Stage 3 tax cuts will come into effect in the new financial year. The planned cuts were recently revised and will now benefit low-income earners.

Stage 3 tax cuts

The Australian Government recently amended the Stage 3 Tax Cuts legislation (which had been previously passed by Parliament in 2019). These tax cuts will commence on 1 July, 2024.

These amendments will result in taxpayers who earn below $150,000 per year receiving a bigger tax cut, with lower and middle-income earners to benefit the most. Those earning above $200,000 per year will have their tax cut reduced from $9,075 per year to $4,529 per year.

The tax rate for those in the first bracket ($18,201-$45,000) will reduce from 19% to 16%, and the rate for those in the next bracket ($45,001- $135,000) will reduce from 32.5% to 30%. The top bracket will now commence at $190,001, increased from $180,001.

Below is a table showing the changes to the original legislation.

The size of your tax cut (excluding Medicare Levy)

Taxable Income Tax cut under original stage 3 Tax cut under revised stage 3 Difference
$20,000 $0 $0 $0
$30,000 $0 $354 $354
$40,000 $0 $654 $654
$50,000 $125 $929 $804
$60,000 $375 $1,179 $804
$70,000 $625 $1,429 $804
$80,000 $875 $1,679 $804
$90,000 $1,125 $1,929 $804
$100,000 $1,375 $2,179 $804
$120,000 $1,875 $2,679 $804
$140,000 $3,275 $3,729 $454
$160,000 $4,675 $3,729 -$946
$180,000 $6,075 $3,729 -$2,346
$200,000+ $9,075 $4,529 -$4,546

 

The Government has explained that the changes were required to assist people with cost-of-living challenges, as all taxpayers will now receive a tax cut, instead of just those on higher incomes.

From a planning point of view, it may be beneficial for taxpayers to bring forward tax deductible expenditure to the 2024 tax year.

If you think that tax planning may be to your benefit, please contact us to discuss your needs.

Published 3 April, 2024