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The Latest Stage 3 Tax Cuts: What does this mean for you?

Tax effects all working Australians. One Click life has put together a summary of how the latest stage 3 tax cuts will affect you. They are introduced from 1 July 2024 and all Australian’s back pockets will be better off for them!  

The Australian government has recently announced new Stage 3 tax cuts, deviating from the initially proposed tax changes by the Liberal government. Let’s delve into the key changes and understand how they differ from the original plan set to take effect in July 2024.

Key Changes in the New Stage 3 Tax Cuts

1. Updated Income Thresholds

The new Stage 3 tax cuts bring adjustments to income thresholds and rates. The effects the amount of income subject to the applicable tax rates. These changes aim to put more money back into the pockets of working Australians, promoting economic growth and individual financial well-being.

  • The 19% tax rate to be reduced to 16% for incomes between $18,200 and $45,000.
  • The 32.5% tax rate to be reduced to 30% for incomes between $45,000 and the new $135,000 threshold.
  • An increase in threshold for the 37% tax rate from $120,000 to $135,000.
  • An increase in threshold for the 45% tax rate from $180,000 to $190,000.

This all means that the new 2025 tax rates table that come into effect Jul 1, 2024 looks like this:

Income range2025 tax rate2025 Tax payable
$0 – $18,2000%Nil
$18,201 – $45,00016%16% of excess over $18,201
$45,001 – $135,00030%30% of excess over $45,000 + $4,288
$135,001 – $190,00037%37% of excess over $135,000 + $31,288
$190,001 +45%45% of excess over $190,000 + $51,638

2. 2025 Tax Rate Adjustments

The tax rate adjustments outlined in the new plan aim to simplify the tax system. As part of Stage 3 tax cuts, the number of tax brackets will be reduced, making it easier for individuals to understand their tax obligations.

We’ve set out the 2024 tax rates and 2025 tax rates below.

Summary of Proposed changes in comparison to current Tax Brackets

Current – 2024 tax rates2025 tax rates (from 1 July, 2024)
Thresholds ($)Rates (%)Thresholds ($)Rates (%)
$18,201 to $45,00019% on income over $18,200$18,201 to $45,00016% on income over $18,200
$45,000 to $120,00032.5% on income over $45,000$45,000 to $135,00030% on income over $45,000
$120,001 to $180,00037% on income over $120,000$135,001 to $190,00037% on income over $135,000
$180,000 and above45% on income over $180,000$190,001 and above45% on income over $190,000

3. Middle-Income Focus

The recalibrated Stage 3 tax cuts specifically target lower tax rates for individuals who land in the lower to middle income brackets. By providing relief to this demographic, the aim is to stimulate spending and investment, ultimately contributing to the overall economic recovery.

Implications for Individuals and Businesses

The impact of the new Stage 3 tax cuts extends to both individual taxpayers and businesses. For individuals, the changes mean potential savings on income tax. This could result in Australians having a little more disposable income than recent years. This, in turn, can have a positive knock-on effect for businesses as consumer spending is likely to see a boost.

For businesses, the tax cuts represent an environment where consumers may have more disposable income. This could result in an increase in demand for goods and services which would provide a much-needed boost to what has been a difficult few years for some Australian businesses.

Who wins from 2024 stage 3 tax cuts?

The 2024 stage 3 tax cuts show an emphasis on accelerating relief for low and middle income earners. We think this is great following the removal of the low and middle income tax offset (LMITO) recently.

Reducing the tax burden on low and middle income earners is achieved by updating income thresholds and lowering tax rates.

You will be impacted by the new stage 3 tax cuts, so it’s good to understand the changes.  

What’s the difference between the old and new stage 3 tax cuts?

The ABC have released a great chart to show how the tax cuts will impact you based on your earnings. This shows the difference between the liberal “proposed” tax cuts and Albos new stage 3 tax cuts.

stage 3 tax cuts calculator - see how they will affect you ABC news

This shows the impact of reduced tax cuts for higher income earners and increased cuts for low and middle income earners.

One Click Life can assist with your online tax return

Working with an online tax agent like One Click Life can help minimise the stress involved with understanding the latest stage 3 tax cuts.

One Click Life provides easy-to-use online tax returns on a platform operated by professionals. Unsure if the stage 3 tax cuts have been applied to your wages – just book a free meeting with one of our tax professionals. Online Wills, lending, health insurance, and online taxes can all be simplified by using One Click Life. One Click Life gives you a hassle-free method to arrange, monitor, and manage all your life’s administrative tasks in one location.

This article is for general information only. It does not make recommendations, nor does it provide advice to address your personal circumstances. To make an informed decision, always contact a registered tax professional.