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  • Writer's pictureUHY Haines Norton

Stage 3 Tax Cuts – What’s in it for you?

By Tina Zawila


In the 2018-19 Federal Budget the former Government announced a Personal Income Tax Plan (PITP) which was aimed to reduce personal income taxes over seven years through a combination of changes to tax offsets for low- and middle-income earners, income tax thresholds and tax rates, with the changes to be implemented in three stages.

Stages 1 and 2 were implemented with Stage 3 due to apply from 1 July 2024.  However, on 25th January 2024, the Prime Minister announced that the Government would redesign the previously legislated Stage 3 tax cuts and increase the Medicare Levy low-income thresholds, because Australia is under dramatically different economic circumstances than those that existed back in 2018-19.  On 6th February 2024, The Treasury Laws Amendment (Cost of Living Tax Cuts) Bill 2024 was passed to give effect to the changes announced.

There has been a lot of commentary in a short space of time regarding  the changes made to the Stage 3 tax cuts, including the potential impact on the Government’s chances of re-election based on a “broken promise”, the impact of these changes on the Federal Budget (tax receipts will decrease by $1.3 billion over the forward estimates period), any possible impact on interest rates, inflation, cost of living relief, workforce, bracket creep and the list goes on. 

So what does it mean to you?  The changes are as follows:

  • reducing the 19% tax rate to 16% for taxable incomes between $18,201 and $45,000

  • reducing the threshold to which the 30% tax rate applies from $200,000 to $135,000

  • adding back the 37% tax rate for taxable incomes between $135,001 and $190,000

  • reducing the threshold to which the 45% tax rate applies from $200,001 to $190,001.

It is estimated that these tax cuts will provide cost-of-living relief to 13.6 million taxpayers.


In short, taxpayers with taxable incomes of less than $146,486 (or nearly 90% of all taxpayers) will get either the same or a larger tax cut under the new plan.  Whereas the 10% with higher incomes will get smaller tax cuts than under the original Stage 3.  The tax cut for people who earn more than $200,000 a year (expected to be less than 5% of taxpayers in 2024-25) will be approximately half of the original tax cut of $9,075, now down to $4,529. 


I think it’s safe to say that given the above summary of the proposed changes, it is obvious why the amendment was passed quickly through parliament and why this topic has almost completely fallen off the media radar.  Now we just need to wait until 1 July 2024 to reap the benefits of the tax cuts and see to what happens at the next Federal election due on or before September 2025.

If you need advice on how these tax cuts will affect you, please contact our professional team at UHY Haines Norton CQ on 4972 1300.

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