Stage 3 tax cuts: from 1 July 2024

What are the stage 3 tax cuts?

Australia’s stage 3 tax cuts are the last stage in the controversial tax package the Federal Government announced and implemented from 2018. The stage 3 tax cuts come into play on 1 July 2024.

The intent of the tax package was to simplify the tax system and provide a solution to bracket creep. The stage 3 tax cuts involve a significant widening of a tax bracket to provide a single marginal tax rate for a considerable number of Australian taxpayers.

 

What do the latest round of Government tax cuts mean for you?

In a nutshell, tax rates for middle and high-income earners are to be lowered and the threshold for high income earners is set to rise.

Here’s how the stage 3 tax cuts look:

  1. Stage 3 sees the end of the 37% tax bracket for people earning between $120,001—$180,000. With a reduction of the 32.5% bracket, this means that everyone earning $45,001 up to $200,000 will pay the same, new marginal tax rate of 30%.
  2. There is also an increase to the 45% tax threshold for higher income earners, which rises from $180,000 up to $200,000.
  3. This ‘flattening’ consequently pulls the number of tax brackets in Australia back to 4.

 

What are the new tax brackets for the 2024-25 financial year?

Tax rate

Taxable income

Nil

$0—$18,200

19%

$18,201—$45,000

30%

$45,001—$200,000
45%

$200,000+

 

How will the stage 3 tax cuts affect you?

This 3rd stage came hot on the heels of stage 2’s tax reform, which ended on 30 June 2022.

The repercussions of stage 2 would have been noticeable to low to middle-income earners after lodging their 2022-23 tax returns. After a year of rising interest rates and living costs, this would have been disappointing to a lot of people throughout the     country.

In contrast, middle to high income earners are the winners in this final round of tax cuts. Australians in this income range should see an increase in their take home pay each month, as the lower tax rates kick in.

 

How that looks in your take home pay:

Basic Salary

Before tax

2019-20

Take home

2021-22

Take home

2024-25

Take home

$45,000

 $38,828 $39,908 $39,908

$70,000

 $55,703 $56,783

$57408

$120,000

 $88,103 $90,533

$92,408

$180,000

 $125,903 $128,333

$134,408
$200,000 $136,903 $139,333

$148,408

 

 

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