Impact of Stage Three Tax Cuts

The recently confirmed Stage 3 tax cuts commencing from 1 July 2024, will provide greater tax relief for lower income earners, however, all taxpayers will receive some benefit.  This should help ease the current cost of living pressures people may be experiencing.

Following is a summary of the changes that will apply, noting that the current tax-free threshold remains at $18,200 so Nil tax is payable up to this amount:

• The tax rate for the first tax bracket ($18,201 – $45,000) will reduce from 19% to 16%;
• The second tax bracket will now end at $135,000 (previously $120,000), and the tax rate will reduce from 32.5% to 30% on income earned between $45,001 and $135,000;
• The third tax bracket will start slightly higher at $135,001 (previously $120,001) with 37% tax applicable on income earned between $135,001 and $190,000;
• The top tax bracket will start from $190,001 (previously $180,001) with 45% tax applicable to income earned above this amount.

Medicare levy is an additional 2% on top of the above tax rates.

This may present some tax planning opportunities, for example, bringing forward tax-deductible expenditure to gain a greater benefit from the tax deduction this financial year or by deferring income where possible so it is assessed under the lower tax rates applicable from 1 July.

Another interesting fact is that, as a result of the Stage 3 tax cuts, the amount of income older Australians who have reached age pension age can earn before they pay any tax, increases to $36,513 for singles and $65,175 for a couple.

Please head to our website booking page or give us a call to book a meeting with your dmca Adviser to find out more about the possible tax planning opportunities that may be applicable to you.

If you want to find out how much your tax liability will change from 1 July 2024, you can use the following calculator to see what your tax savings will be: Tax cut calculator | Treasury.gov.au