Stage 3 Tax Cuts Revisited
The Albanese government’s redesign of the Stage 3 tax cuts means there are now different winners
and losers, as opposed to the original tax cuts package introduced several years ago by the former
Liberal government.
The adjustment is seen as a means to assist low and middle income earners facing the ongoing cost-
of-living pressure in the current economic climate, and it is set to begin on July 1, 2024. Let’s see
what the changes mean for you!
Current tax system looks like this….
Current tax table for tax year 2023-2024 | ||
|---|---|---|
Income Range | Marginal Tax Rate | Tax Payable |
$0-$18,200 | 0% | Nil |
$18,201-$45,000 | 19% | 19% of excess over $18,200 |
$45,001-$120,000 | 32.5% | $5,092+32.5% of excess over $45,000 |
$120,001-$180,000 | 37% | $29,467+37% of excess over $120,000 |
$180,001+ | 45% | $51,667+45% of excess over $180,000 |
What were the original Stage 3 cuts?
- The same 19% tax rate applies to earnings between $18,201 and $45,000.
- 37% marginal tax rate was to be abolished for those earnings between $120,001 and $180,000.
- Instead, a single 30% tax rate was to be applied for all earnings between $45,001 and $200,000.
- For earnings above $200,000, the current 45% tax rate would have been applied.
However, as originally designed, the Stage 3 cuts delivered greater benefits to those on high incomes
($9,075 tax cut for $200,000 earnt) and no benefit resulted for those earning up to $45,000 and only
$875 savings for people earning $80,000.
New tax table with legislated Stage 3 tax cuts (from 1 July 2024) | ||
Income Range | Marginal Tax Rate | Tax Payable |
$0-$18,200 | 0% | Nil |
$18,201-$45,000 | 19% | 19% of excess over $18,200 |
$45,001-$200,000 | 30% | $5,092+30% of excess over $45,000 |
$200,001+ | 45% | $51,592+45% of excess over $200,000 |
What are the proposed changes to Stage 3 cuts?
The Albanese government’s proposal, if passed by the parliament, means:
- A cut in 19% tax rate to 16% for earnings between $18,201 and $45,000.
- A cut in 32.5% tax rate to 30% for earnings between $45,001 and $135,000.
- The same 37% rate applies but the threshold is now for earnings between $135,001 and
$190,000. - The same 45% rate applies but the threshold is now for earnings above $190,001.
The effect of the redesigned package is that those earning $200,000 are worse off and will now
receive $4,546 tax cut as opposed to $9,075.
New tax table with proposed and revised Stage 3 tax cuts (from 1 July 2024) | ||
Income Range | Marginal Tax Rate | Tax Payable |
$0-$18,200 | 0% | Nil |
$18,201-$45,000 | 16% | 16% of excess over $18,200 |
$45,001-$135,000 | 30% | $4,288+30% of excess over $45,000 |
$135,001-$190,000 | 37% | $31,288+37% of excess over $135,000 |
$190,001+ | 45% | $51,638+45% of excess over $190,000 |
While the cost of the tax cuts package overall remain the same, there has been a wider distribution of tax savings across different groups with the revised tax cut proposal. In particular, low and middle income households with average annual incomes of $97,000 and $136,000 are the biggest winners at tax time!
Redistribution of tax cuts (excluding Medicare Levy) | |||
Taxable Income | Tax cut under original stage 3 | Tax cut under revised stage 3 | Difference |
$20,000 | $0 | $0 | $0 |
$30,000 | $0 | $354 | $354 |
$40,000 | $0 | $654 | $654 |
$50,000 | $125 | $929 | $804 |
$60,000 | $375 | $1,179 | $804 |
$70,000 | $625 | $1,429 | $804 |
$80,000 | $875 | $1,679 | $804 |
$90,000 | $1,125 | $1,929 | $804 |
$100,000 | $1,375 | $2,179 | $804 |
$120,000 | $1,375 | $2,679 | $804 |
$140,000 | $3,275 | $3,729 | $454 |
$160,000 | $4,675 | $3,729 | -$946 |
$180,000 | $6,075 | $3,729 | -$2,346 |
$200,000 | $9,075 | $4,529 | -$4,546 |
$250,000 | $9,075 | $4,529 | -$4,546 |
Useful link: Calculate how much tax savings you can make under revised Stage 3 tax cuts package!
https://www.abc.net.au/news/2024-01-25/stage-three-tax-cut-calculator/103387580
Author
May Aung