After much debate, legislation to scale back “Stage 3 tax cuts” is now law. This legislation passed parliament on 27 February 2024 and received assent on 5 March 2024. Consequently, you may now be wondering what the revised Stage 3 tax cuts mean for you.
Earlier this year, the Albanese government announced it would scale back the previously legislated Stage 3 tax cuts. The result is that the benefit received by those in the highest income brackets will be halved. Lower and middle- income earners will receive more of the benefit than originally legislated.
The Albanese government had previously stated it was fully committed to the passage of the Stage 3 tax cuts as previously legislated. This scale-back is therefore a major backflip.
New legislated Stage 3 tax cuts
The revised individual resident tax rates that will now apply, from 1 July 2024 onwards, will be:
| INCOME BRACKET: 2024-25 ONWARDS ($) | TAX RATE: 2024-25 ONWARDS (%) |
|---|---|
| 0 – 18,000 | 0 |
| 18,001 – 45,000 | 16 |
| 45,001 – 135,000 | 30 |
| 135,001 – 190,000 | 37 |
| 190,001 + | 45 |
The key changes from the current (2023-2024) income tax rates are:
- a reduction from the 19% tax rate to 16% for incomes between $18,200 and $45,000
- a reduction of the 32.5% tax rate to 30% for incomes between $45,000 and a higher $135,000 threshold
- an increase to the threshold at which the 37% tax rate applies from $120,000 to $135,000.
- an increase in the threshold at which the 45% tax rate applies from $180,000 to $190,000.
From 1 July 2024 onwards:
- a person earning over $200,000 p.a. will pay $4,529 less tax annually
- a person earning $100,000 p.a. will pay $2,179 less tax annually
- a person earning $50,000 p.a. will pay $929 less tax annually
Lower and middle- income Australian earners will no doubt welcome the increased benefits they will receive under the revised Stage 3 tax cuts. However, some of the highest-income earners will be disappointed that they will not receive the full benefits they may have anticipated from the Stage 3 tax cut as originally enacted.
Although the tax cuts are less than expected for some, this is still a great planning opportunity. And it is important to start planning now for year end.
To discuss how the revised Stage 3 tax cuts may impact you, and what you can consider regarding your taxable income for the next financial year, contact your Synectic adviser.
