The revised tax cuts redistribute the reforms to benefit lower income households that have been disproportionately impacted by cost of
living pressures.
Under the proposed redesign, all resident taxpayers with taxable income under $146,486, who would actually have an income tax liability,
will receive a larger tax cut compared with the existing Stage 3 plan. For example:
-
An individual with taxable income of $40,000 will receive a tax cut of $654, in contrast to receiving no tax cut under the current Stage 3
plan (but they are likely to have benefited from the tax cuts at Stage 1 and Stage 2).
-
An individual with taxable income of $100,000 would receive a tax cut of $2,179, which is $804 more than under the current Stage 3
plan.
However, an individual earning $200,000 will have the benefit of the Stage 3 plan slashed to around half of what was expected from $9,075 to
$4,529. There is still a benefit compared with current tax rates, just not as much.
There is additional relief for low-income earners with the Medicare Levy low-income thresholds expected to increase by 7.1% in line with
inflation. It is expected that an individual will not start paying the 2% Medicare Levy until their income reaches $32,500 (up from
$26,000).
While the proposed redesign is intended to be broadly revenue neutral compared with the existing budgeted Stage 3 plan, it will cost around
$1bn more over the next four years before bracket creep starts to diminish the gains.
The current, legislated, and redesigned Stage 3 tax rates for Australian resident taxpayers
Tax Rate
|
2023-24
|
2024-25 legislated
|
2024-25 proposed
|
0% |
$0 – $18,200 |
$0 – $18,200 |
$0 – $18,200 |
16% |
|
|
$18,201 – $45,000 |
19% |
$18,201 – $45,000 |
$18,201 – $45,000 |
|
30% |
|
$45,001 – $200,000 |
$45,001 – $135,000 |
32.5% |
$45,001 – $120,000 |
|
|
37% |
$120,001 – $180,000 |
|
$135,001 – $190,000 |
45% |
>$180,000 |
>$200,000 |
>$190,000 |