What You Need to Know About the Stage 3 Tax Cuts and Your Tax Return
What is Stage3 Tax Cuts
Beginning on July 1st 2024, most Australian taxpayers will see reductions in their tax obligations thanks to the stage 3 tax cuts.
By lowering marginal rates of income tax, particularly for middle-income earners, these tax changes aim to ease financial pressures in a fiscally prudent manner. At a time when living costs are rising sharply, putting more money back in people’s pockets through tax relief should boost household spending power.
By delivering tax cuts that benefit over 13 million Australians, including many women, the goal is to encourage workforce participation and address skills shortages as our economy transitions. While tax cuts often benefit higher earners too, on balance these tax changes are designed to support those feeling the most squeezed due to current economic conditions.
Summary of Stage 3 Tax Cuts Changes
Summary of the new individual income tax rates and thresholds effective July 1, 2024
- All Australian taxpayers have a $18,200 tax-free threshold.
- Income between $18,201 and $45,000 is taxed at 16%.
- Income between $45,001 and $135,000 is taxed at 0% on the first 18200, 16% on the next $26,800, then 30% on the remainder.
- Income between $135,001 and $190,000 is taxed at 0% on the first 18200, 16% on the next $26,800, 30% on the next $90,000, and 37% on the remainder.
- Income over $190,000 is taxed at 0% on the first 18200, 16% on the next $26,800, 30% on the next $90,000, 37% on the next $55,000, and 45% on any amount over $190,000.
2023 ~ 2024 TAX RATE
2024 ~ 2025 TAX RATE
Thresholds | Rates |
0 – $18,200 | Tax free |
$18,201 – $45,000 | 19% |
$45,001 – $120,000 | 32.5% |
$120,001 – $180,000 | 37% |
Over $180,000 | 45% |
Thresholds | Rates |
0 – $18,200 | Tax free |
$18,201 – $45,000 | 16% |
$45,001 – $135,000 | 30% |
$135,001 – $190,000 | 37% |
Over $190,000 | 45% |
While the changes don’t take effect until 2024 tax time, you can benefit this year by ensuring you receive the full lower rate tax on any income earned in 2023-24 financial year that falls under the future thresholds.
Check with your employer to make sure the correct amount is withheld from your last few paychecks of 2023 before the new rates kick in fully.
Stage 3 Tax Cuts Calculator
Estimate your 2024-25 tax changes here. This calculator shows how much tax cuts you can get in 2024 – 2025 tax return.
Source: https://treasury.gov.au/sites/default/files/2024-01/tax-cuts-government-fact-sheet.pdf