Starting July 1st, if you are a taxpayer, you will be paying less in taxes.
The government has recently changed the stage 3 tax cut that was introduced by the former Liberal government a few years ago.
The original package was unfair as it favoured those with high incomes who only required a little relief. Low and middle-income taxpayers need help to afford their living expenses. They intend to adjust to provide them with financial assistance. This relief will help hardworking families cover essential expenses such as mortgages, food, and fuel bills.
The stage 3 tax cut makes it so that every worker will see a little boost to their pay slips starting from July 1st.
What Are Stage 3 Tax Cuts?
All Australians will receive a tax cut; however, those on higher incomes may receive a more minor cut than expected.
The Labor Party pledged in the last election not to repeal the new stage 3 tax cut that was passed by parliament in 2019. So this removed the 37% tax bracket for those earning between $120,000 and 180,000 but also increased the top tax bracket from $180,000 to $200,000 and lowered the 32.5% tax rate to 30%.
Find out how the new stage 3 tax cuts will affect you.
What Are the New Stage 3 Tax Cuts Brackets?
The first $18,200 of annual earnings is not subject to tax, which is referred to as the tax-free threshold. After that, there are four tax brackets with different rates.
Individuals are taxed at:
- 19% on earnings between $18,201 and $45,000
- 32.5% on earnings between $45,001 and $120,000
- 37% on earnings between $120,001 and $180,000
- 45% for every dollar earned over that.
However, with the proposed new stage 3 tax cut, this is what the new brackets look like.
Individuals are taxed at:
- 16% on earnings between $18,201 and $45,000
- 30% on earnings between $45,001 and $135,000
- 37% on earnings between $135,001 and $190,000
- 45% on earnings $190,001 and above.
Below is a table of taxable income, the original stage 3 tax cut, and the new stage 3 tax cuts.
| Income ($) | Stage 3 Tax Cut | New Stage 3 Tax Cut | Difference |
| 20,000 | 0 | 0 | 0 |
| 30,000 | 0 | 354 | 354 |
| 40,000 | 0 | 654 | 654 |
| 50,000 | 125 | 929 | 804 |
| 60,000 | 375 | 1,179 | 804 |
| 70,000 | 625 | 1,429 | 804 |
| 80,000 | 875 | 1,679 | 804 |
| 90,000 | 1,125 | 1,929 | 804 |
| 100,000 | 1,375 | 2,179 | 804 |
| 120,000 | 1,875 | 2,679 | 804 |
| 140,000 | 3,275 | 3,729 | 454 |
| 160,000 | 4,675 | 3,729 | 946 |
| 180,000 | 6,075 | 3,729 | 2,346 |
| 200,000 | 9,075 | 4,529 | 4,546 |
| 250,000 | 9,075 | 4,529 | 4,546 |
Stage 3 Tax Cuts Calculator
To know exactly how this new stage 3 tax cut affects you, feel free to check out the Australian treasury website for a stage 3 tax cuts calculator.
When Do Stage 3 Tax Cuts Start?
After hearing this news, you might be curious as to when do the stage 3 tax cuts will start. The new stage 3 tax cut comes into effect at the start of the next financial year, which is July 1st.
Please note that this change is different from some of the prior tax changes in recent years.
Unlike the “LMITO” tax offset, which returned up to $1080 during tax time, this won’t be a lump sum payment provided during tax season.
So, instead, starting July 1st, you will have slightly less tax taken out of your regular pay slip. Your pay should automatically reflect these specific changes.
You will see a bit extra on your pay slip, but is it enough to satisfy your financial needs? Australians in 2024 are actually using banks to make an extra profit. This is an opportunity you want to take advantage of. Check out this article on how you can also make an extra profit using a bank.
Bottom Line
The proposed changes aim to fund returns for lower-income earners by reducing benefits for higher-income earners.
The original stage three tax cuts primarily benefited those on higher incomes. However, with these new changes, households on middle incomes are the biggest beneficiaries this time around.
Starting July 1st, if you are a worker, expect to see a little boost in your regular pay slip.