Yahoo Finance Cost of living tax cuts: The date millions of Aussies will see 'immediate increase in take home pay'
Stage 3 tax cuts will come in on July 1, so how will they benefit you?
Australians battling with inflation might be banking on their tax return for a little cash boost. But the government's "tax cuts to help with the cost of living" won't make a difference like the Low and Middle Income Tax Offset once did when you lodge your return with the Australian Taxation Office after June 3.
Instead, all Australian workers will start to see a change in their take-home pay from 1 July 2024 when the stage 3 tax cuts kick in. Whether the cuts, which were controversially reduced for the wealthy and redirected to middle and low-income earners, will help or hinder you all depends on how much you make per year.
I've written a guide for Yahoo Finance to help you simply work out exactly how the stage 3 tax cuts will play out for you in the next financial year.
What tax cuts are coming?
A cut in the 19 per cent tax rate to 16 pr cent, saving $804 for those on taxable incomes of $45,000
A cut in the 32.5 per cent rate to 30 per cent for incomes between $45,000 and $135,000
Retaining the 37 per cent rate but increasing the threshold for it to apply to $135,000.
Retaining the current 45 per cent tax rate but increasing the threshold to $190,000
New tax table, from 1 July 2024, with proposed revised (Jan 25th) Stage 3 tax cuts | |||
Bracket | Income range | Marginal Tax Rate | Tax payable |
1 | $0-$18,200 | 0 per cent | Nil |
2 | $18,201-$45,000 | 16 per cent | 16 per cent of excess over 18,201 |
3 | $45,001-$135,000 | 30 per cent | 4,288 + 30 per cent of excess over $45,000 |
4 | $135,001-$190,000 | 37 per cent | 31,288 + 37 per cent of excess over $135,000 |
5 | $190,001+ | 45 per cent | 51,638 + 45 per cent of excess over $190,000 |
Do you have a story? Email yahoo.finance.au@yahooinc.com
Medicare levy: Who benefits from changes?
Additionally, the Medicare low-income threshold is being increased.
The Medicare levy is 2 per cent of your taxable income but is not payable by those on low incomes. The threshold currently exempts people earning $24,276 or less from paying the Medicare levy.
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After that, the levy increases gradually and the full 2 per cent levy is paid by anyone earning more than $30,345.
Those thresholds are changing to $26,000 and $32,500, which represent a 7.1 per cent increase in line with inflation.
More Australians to get tax cuts under new plan
The tax savings have been distributed much more widely than was expected under the original Coalition plan.
They are now focused on low and middle-income taxpayers, who were not well served by the previously proposed tax cuts.
They have been suffering from increases in the cost of living and are far more numerous than high-income earners (less than 5 per cent of whom earn more than $180,000).
The effect of the tax cuts can best be illustrated in table form.
The original stage 3 cuts are those suggested by the Coalition and the revised tax cuts are those actually legislated by the Albanese government.
Redistribution of tax cuts
Taxable income ($) | Tax cut under original stage 3 ($) | Tax cut under revised stage 3 ($) | Difference |
20,000 | 0 | 0 | 0 |
30,000 | 0 | 354 | 354 |
40,000 | 0 | 654 | 654 |
50,000 | 125 | 929 | 804 |
60,000 | 375 | 1,179 | 804 |
70,000 | 625 | 1,429 | 804 |
80,000 | 875 | 1,679 | 804 |
90,000 | 1,125 | 1,929 | 804 |
100,000 | 1,375 | 2,179 | 804 |
120,000 | 1,875 | 2,679 | 804 |
140,000 | 3,275 | 3,729 | 454 |
160,000 | 4,675 | 3,729 | -946 |
180,000 | 6,075 | 3,729 | -2,346 |
200,000 | 9,075 | 4,529 | -4,546 |
250,000 | 9,075 | 4,529 | -4,546 |
Note: excludes Medicare levy |
So, as originally designed, the tax cuts delivered most of the benefit to those on high incomes.
So, nothing at all for people earning $45,000, only $875 for people earning $80,000 but a whopping $9,075 for people earning $200,000.
This has now been rectified and, with the cost of living disproportionately impacting low and middle-income taxpayers, this will provide some much-needed extra cash in the pockets of hard-working families to pay mortgages, food and fuel bills.
How do I get my tax cut?
Taxpayers don’t need to do anything to get the tax cut.
Employers will automatically adjust the amount of tax they take out of your pay which means you should see an immediate increase in take-home pay from 1 July.
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