What do the stage 3 personal income tax cuts mean for you?

The Stage 3 tax cuts commenced on 1 July 2024. Employees should have noticed from their first pay in July that their take home pay has increased.

What will change?

The stage 3 tax cuts have been designed to benefit lower income households that have been disproportionately impacted by cost of living pressures.

The 19% tax rate has reduced to 16%, the 32.5% tax rate has been reduced to 30%. Increased the thresholds above which the 37% tax rate applied from $120,000 to $135,000 and the 45% tax rate applied from $180,000 to $190,000.

An individual with taxable income of $40,000 will receive a tax cut of $654.
An individual with taxable income of $100,000 will receive a tax cut of $2,179.
An individual with a taxable income of $200,000 will receive a tax cut of $4,529.

There is additional relief for low-income earners with the Medicare Levy low-income thresholds. An individual will not start paying the 2% Medicare Levy until their income reaches $32,500 (up from $26,000).

How did we get here?

First announced in the 2018-19 Federal Budget, the personal income tax plan was designed to address the very real issue of ‘bracket creep’ – tax rates not keeping pace with growth in wages and increasing the tax paid by individuals over time. The three point plan sought to restructure the personal income tax rates by simplifying the tax thresholds and rates, reducing the tax burden on many individuals and bringing Australia into line with some of our neighbours (i.e., New Zealand’s top marginal tax rate is 39% applying to incomes above $180,000).

The three point plan introduced incremental changes from 1 July 2018, 1 July 2020 and 1 July 2024

The legislated redesigned Stage 3 tax rates for Australian resident taxpayers

*this does not include the 2% medicare levy

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