Revised Stage 3 Tax Cuts From 1 July 2024: What They Mean for You
Now that the revised Stage 3 tax cuts have passed all stages of Parliament and received Royal Assent, the new tax rates are law and will apply from 1 July 2024. While these revised rates do not apply to the current financial year, understanding the changes now allows individuals to plan more effectively for the future.
Depending on income level, the impact of the revised rates will differ. This article examines how the new tax rates affect individuals earning $67,600, $98,176 and $180,000 per year.
Impact on Australian Resident Taxpayers
Individuals Earning $67,600
For the 2023–24 income year, an individual earning $67,600 is expected to pay approximately $12,437 in income tax.
From the 2024–25 income year, assuming the same income level, the tax payable will reduce to approximately $11,068. This represents a tax saving of around $1,369 per year, or roughly $26 per week.
Individuals Earning $98,176
An individual earning $98,176 annually will pay around $22,374 in tax for the 2023–24 income year.
Under the revised tax rates from 2024–25, their tax bill will fall to approximately $20,240. This results in a tax saving of around $2,133 per year, or about $41 per week.
Individuals Earning $180,000
For those earning $180,000 per year, the tax payable for the 2023–24 income year is approximately $51,667.
From 2024–25, tax payable will reduce to approximately $47,938, delivering a tax saving of around $3,729 per year, or roughly $71 per week.
Changes to Foreign Resident Tax Rates
The revised Stage 3 tax cuts also affect tax rates for foreign residents.
Foreign Resident Tax Rates Comparison
2023–24
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$0–$120,000: 32.5%
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$120,001–$180,000: $39,000 plus 37% of excess over $120,000
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$180,001 and over: $61,200 plus 45% of excess over $180,000
2024–25
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$0–$135,000: 30%
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$135,001–$190,000: $40,500 plus 37% of excess over $135,000
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$190,001 and over: $60,850 plus 45% of excess over $190,000
Changes to Working Holiday Maker Tax Rates
Working holiday makers will also benefit from the revised rates.
Working Holiday Maker Tax Rates Comparison
2023–24
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$0–$45,000: 15%
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$45,001–$120,000: $6,750 plus 32.5% of excess over $45,000
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$120,001–$180,000: $31,125 plus 37% of excess over $120,000
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$180,001 and over: $53,325 plus 45% of excess over $180,000
2024–25
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$0–$45,000: 15%
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$45,001–$135,000: $6,750 plus 30% of excess over $45,000
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$135,001–$190,000: $33,750 plus 37% of excess over $135,000
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$190,001 and over: $54,100 plus 45% of excess over $190,000
Cost-of-Living Relief and Economic Impact
The revised Stage 3 tax cuts were introduced as a cost-of-living relief measure, designed to put more money back into the pockets of Australian workers to help manage the impact of rising inflation.
By extending proportional tax relief to foreign residents and working holiday makers, the Government is also aiming to stimulate additional spending within the economy, supporting broader economic activity.
Additional Support Through Medicare Levy Threshold Changes
To further assist lower income earners, the Government has also increased the low-income Medicare levy thresholds for eligible singles, families, seniors and pensioners.
These higher thresholds apply to the 2023–24 income year and mean that more low-income earners can avoid paying the Medicare levy entirely or pay a reduced amount, easing cost-of-living pressures even before the revised tax rates take effect.
Key Takeaway
The revised Stage 3 tax cuts will deliver meaningful tax savings across a wide range of income levels from 1 July 2024. Understanding how these changes apply to your income, residency status and circumstances allows for better financial planning and ensures you are prepared to make the most of the new tax settings.
Speak to one of our accountants if you have any questions about the changes in tax for 2023.
