Understanding the upcoming Stage 3 tax cuts is crucial for Australian taxpayers. Introduced in 2018, these cuts are designed to simplify the tax system and provide relief from bracket creep. Here’s what you need to know about the proposed changes set for the 2024-25 income year.
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Understanding Stage 3 Tax Cuts
Understanding the upcoming Stage 3 tax cuts is crucial for Australian taxpayers. Introduced in 2018, these cuts are designed to simplify the tax system and provide relief from bracket creep. Here’s what you need to know about the proposed changes set for the 2024-25 income year.
| Income | Current tax rate |
| $18,200 or less | 0% |
| $18,201 – $45,000 | 19% |
| $45,001 – $120,000 | 32.5% |
| $120,001 – $180,000 | 37% |
| $180,001+ | 45% |
Source: Australian residents tax rates 2023–24
| Income | Tax rate after re-designed stage three tax cuts |
| $18,200 or less | 0% |
| $18,201 – $45,000 | 16% |
| $45,001 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| $190,001+ | 45% |
Source: Albanese says new stage three tax cuts ‘overwhelmingly’ benefit middle Australia
Original Plan vs. Proposed Changes
Initially, the Stage 3 tax cuts proposed to eliminate the 37% tax rate for those earning above $120,000 and reduce the tax rate to 30% for incomes between $45,000 and $200,000. However, this structure disproportionately benefited higher earners.
In response to criticisms and the current economic climate, Prime Minister Anthony Albanese announced a reworked plan that provides more equitable relief, particularly focusing on low and middle-income earners amidst the cost-of-living crisis.
| Taxable income | Old Stage | New Stage 3 |
| $30,000 | $0 | $354 |
| $40,000 | $0 | $654 |
| $50,000 | $125 | $929 |
| $60,000 | $375 | $1,179 |
| $70,000 | $625 | $1,429 |
| $80,000 | $875 | $1,679 |
| $90,000 | $1,125 | $1,929 |
| $100,000 | $1,375 | $2,179 |
| $120,000 | $1,875 | $2,679 |
| $140,000 | $3,275 | $3,729 |
| $160,000 | $4,675 | $3,729 |
| $180,000 | $6,075 | $3,729 |
| $190,000 | $9,075 | $3,729 |
Source: PM puts tax pitch to senators ahead of ‘middle Australia’ sales tour
Impact of Redesigned Tax Cuts
Under the redesigned plan, high-income earners will still see reduced benefits, while the majority of Australians, especially those earning the average wage of $73,000, will receive more significant tax cuts. This adjustment aims to better distribute tax relief, ensuring that it reaches those who need it most.
The majority of Australian taxpayers stand to benefit from the redesigned Stage 3 tax cuts, with significant reductions across various income levels. Whether you’re a part-time worker, a renter or someone earning under $45,000, the new plan aims to provide more substantial support.
Do You Need To Do Anything To Get These Tax Cuts On Your Return?
No, if the marginal tax rate for your income has been reduced as a result of these tax cuts, the new tax rate will automatically be applied both by your employer and on your tax return.
Need Expert Advice?
Navigating the upcoming Stage 3 tax cuts can be complex but staying informed will help you understand their impact on your finances. If you’re looking for personalised advice or need assistance with these changes, our accountants are here to support you. Reach out to us for professional guidance to ensure you’re well-prepared.
