Government Alters Plans for Stage 3 Tax Cuts

As of 1 July 2024, the Federal Government has revealed modifications to the scheduled Stage 3 tax cuts, deviating from the originally planned trajectory.  

To recap, the previous Coalition Government had outlined a comprehensive strategy featuring three stages of reduced marginal tax rates and adjusted income brackets spanning from the 2018-19 to the 2024-25 income years. The Stage 3 tax cuts, initially slated to commence on 1 July 2024, were endorsed by the current Labor Government during the recent election. 

The newly announced changes to the Stage 3 tax cuts aim to deliver increased tax relief for lower to middle income earners, while concurrently reducing the planned tax cuts for higher income individuals. The following tables highlight the amended details, with the changes underscored in underlined text. 

PROPOSED CHANGES BY LABOR GOVERNMENT FROM JULY 1, 2024
Tax Rates	Income Thresholds
Nil	Up to $18,200
16%	$18,201 - $45,000
30%	$45,001 - $135,000
37%	$135,001 - $190,000
45%	Above $190,000

PLANNED STAGE 3 TAX CUTS FROM JULY 1, 2024
Tax Rates	Income Thresholds
Nil	Up to $18,200
19%	$18,201 - $45,000
30%	$45,001 - $200,000
37%	Was to be removed
45%	Above $200,000

It is important to highlight that the reinstatement of the 37% tax bracket (originally planned for removal) and the substitution of the 19% tax rate with a 16% tax rate will have effects for individuals earning over approximately $150,000. Although these earners will still experience a tax benefit, the net tax advantage derived from the proposed changes will be reduced compared to the initially envisioned Stage 3 tax cuts. 

Conversely, all taxpayers earning less than approximately $150,000 will enjoy an additional net tax benefit resulting from the recently announced adjustments.