Recently, the government announced changes to the third stage of tax cuts, commonly referred to as Stage 3 Tax Cuts, due to be a change in legislation and commence 1 July 2024.

Why are the Stage 3 Tax Cuts changing

Economic challenges are a focus of the government, in particular cost of living and bracket creep (taxpayers being pushed into a new tax bracket due to inflation of wages and paying more tax).

There was a first iteration of the stage 3 tax cuts released in 2019 by the previous government.

Compared, these changes are designed to provide a higher tax cut to lower income earners, whilst still maintaining all taxpayers receiving a tax cut.

What are the changes

The changes to legislation ensure that from 1 July 2024:

• The 19 per cent tax rate reduces to 16 per cent
• The 32.5 per cent tax rate reduces to 30 per cent (for incomes between $45,000 and the new $135,000 threshold)
• The threshold above which the 37 per cent tax rate applies increases from $120,000 to $135,000, and
• The threshold above which the 45 per cent tax rate applies increases from $180,000 to $190,000.

The table below provides a comparison of current tax rates to the legislated stage 3 tax rates to the changes to the legislation.

How will the changes affect you

Any taxpayer on a salary or wage will notice an increase in net wages (disposable income) during each pay cycle.

Taxpayers earning any business, investment, or rental income will notice the changes once tax return estimates are calculated.

Some examples of the tax cuts at various taxable incomes:

• $30,000 taxable income will receive $354 tax cut
• $55,000 taxable income will receive $1,054 tax cut
• $90,000 taxable income will receive $1,929 tax cut
• $125,000 taxable income will receive $3,029 tax cut

If you would like to discuss how these changes will personally impact you, please contact us at Johnsons MME.