Stage 3 Personal Income Tax Cut Changes

The government announced new changes to individual income tax rates and thresholds on 25 January 2024 that may come into effect from 1 July 2024. Keep in mind that these changes are not yet law. From 1 July 2024, the tax cuts will:
• 19% tax rate will be reduced and it will be 16%
• reduce the tax rate from 32.5% to 30%
• the threshold for a 37% tax rate will be increased to $135,000
• the threshold for a 45% tax rate will be increased from the current $180,000 to $190,000.

Are Redesigned Tax Cuts Beneficial for You?

The vast majority of Australian Taxpayers will be able to receive a large tax cut because of the redesigned tax cut scheme by the Albanese government, if Parliament supports this scheme. For instance, Australians earning $40,000, then according to the old plan, they won’t receive anything. However, under the latest plan, they would receive approximately $654 on their return. Let’s take another example someone earning $60,000. They would receive a tax cut of $375 with the old scheme. However, under the new scheme, they will receive $1179.

What If Parliament Supports the Stage Three Tax Cut Changes?

If the Parliament supports these changes, then there will be numerous outcomes. On July 1:
• All 13.6 million taxpayers will be able to receive a tax cut and 2.9 million more taxpayers will be able to receive tax cut as compared to Morrison’s plan.
• 11.5 million taxpayers will be able to receive a more tax cut as compared to Morrison’s plan.
• A bigger tax cut will be received by 5.8 million women.
• A person with an income of approximately $73,000 will be able to receive a tax cut of $1,504.
• A person with an average income of around $40,000 will receive a tax cut of $654.
• A tax cut of $2,179 will be received by a person earning $100,000.
• A person with an average income of $200,000 will save $4,529.

With this scheme, more than a million Australians will get benefits, ensuring people on lower incomes pay a reduced levy rate. These new tax cuts will offer bigger tax cuts for middle Australia to help them with the cost of living.

Additional relief will be provided to low-income earners with the Medicare Levy low-income threshold increasing by 7.1% with inflation. It is expected that an individual will not pay the Medicare Levy until their income reaches $26,000 and will not be required to pay the full 2% until $32,500 (for singles).

Conclusion
The blog outlines the latest tax cut changes and possible benefits that Australians can receive. If you want to know more about these changes, you can contact Reliable Melbourne Accountants.