31 Jan Stage 3 Personal Income Tax Cuts Confirmed
The revised stage 3 tax cuts have passed Parliament and will come into effect on 1 July 2024.
Before the new tax rates come into effect, check any salary sacrifice agreements to ensure that they will continue to produce the result you are after.
What will change?
Resident individuals
| Tax rate | 2023-24 | 2024-25 |
| 0% | $0 – $18,200 | $0 – $18,200 |
| 16% | $18,201 – $45,000 | |
| 19% | $18,201 – $45,000 | |
| 30% | $45,001 – $135,000 | |
| 32.5% | $45,001 – $120,000 | |
| 37% | $120,001 – $180,000 | $135,001 – $190,000 |
| 45% | >$180,000 | >$190,000 |
Non-resident individuals
| Tax rate | 2023-24 | 2024-25 |
| 30% | $0 – $135,000 | |
| 32.5% | $0 – $120,000 | |
| 37% | $120,001 – $180,000 | $135,001 – $190,000 |
| 45% | >$180,000 | >$190,000 |
Working holiday makers
| Tax rate | 2023-24 | 2024-25 |
| 15% | 0 – $45,000 | 0 – $45,000 |
| 30% | $45,001 – $135,000 | |
| 32.5% | $45,001 – $120,000 | |
| 37% | $120,001 – $180,000 | $135,001 – $190,000 |
| 45% | >$180,000 | >$190,000 |
Under the redesign, all resident taxpayers with taxable income under $146,486, who would actually have an income tax liability, will receive a larger tax cut compared with the existing Stage 3 plan. For example:
- An individual with taxable income of $40,000 will receive a tax cut of $654, in contrast to receiving no tax cut under the current Stage 3 plan (but they are likely to have benefited from the tax cuts at Stage 1 and Stage 2).
- An individual with taxable income of $100,000 would receive a tax cut of $2,179, which is $804 more than under the current Stage 3 plan.
However, an individual earning $200,000 will have the benefit of the Stage 3 plan slashed to around half of what was expected from $9,075 to $4,529. There is still a benefit compared with current tax rates, just not as much.
There is additional relief for low-income earners with the Medicare Levy low-income threshold increasing by 7.1% in line with inflation. It is expected that an individual will not start paying the Medicare Levy until their income reaches $26,000 and will not pay the full 2% until $32,500 (for singles).
While the proposed redesign is intended to be broadly revenue neutral compared with the existing budgeted Stage 3 plan, it will cost around $1bn more over the next four years before bracket creep starts to diminish the gains.
For more information, please contact;
Inder Pal Singh
P: +61 3 9853 3007
E: inder@aspirepartners.com.au