Starting 1 July, a wider range of taxpayers will benefit from tax reductions as the tax cuts bill proposed by Labor has successfully passed through the Senate.
Key points
On 25 January 2024, the Prime Minister announced that the Government would redesign the legislated Stage 3 tax cuts and increase the Medicare levy low-income thresholds. The following Bills give effect to those announced changes:
- The Treasury Laws Amendment (Cost of Living Tax Cuts) Bill 2024 will amend the Income Tax Rates Act 1986 to reflect the changes to the tax rates and income tax brackets for residents, non-residents and working holidaymakers. The changes will apply for the 2024–25 and later income years.
The amendments proposed in the Bills will change the legislated Stage 3 rates by:
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- 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.
- The Treasury Laws Amendment (Cost of Living—Medicare Levy) Bill 2024 will amend the A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Act 1999 and Medicare Levy Act 1986 to increase the Medicare levy low-income thresholds for the 2023–24 and later income years.
Stage 3 is due to apply from 1 July 2024.
The original Stage 3 tax cuts were part of the former Government’s Personal Income Tax Plan (PITP) announced in the 2018–19 Budget. The PITP 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. The changes were to be implemented in three stages. Stages 1 and 2 have been implemented.
Related reading
Source: aph.gov.au