Government Announces Changes To Proposed Stage 3 Tax Cuts

Despite previous assurances, after much speculation, the Government has announced tweaks to the Stage 3 tax cuts that will apply from 1 July 2024.

In the accompanying press release, the Government stated that it had “found a more responsible way to ensure more people get a bigger tax cut to help ease the pressure they are under.”

In order to achieve this objective, the changes will:

– Reduce the 19% tax rate to 16%;

– Reduce the 32.5% tax rate to 30% for incomes between $45,000 and a new $135,000 threshold;

– Increase the threshold at which the 37% tax rate applies from $120,000 to $135,000; and

– Increase the threshold at which the 45% tax rate applies from $180,000 to $190,000. The proposed tax rates are summarised in the below table:

The Government also noted in the press release that the Medicare levy low-income thresholds for the 2024 income year will be increased.

We have also prepared another table (below) to illustrate the differences in the tax payable under the revised State 3 rates as compared with the tax payable under the original Stage 3 tax cuts.