Stage 3 income tax cuts for individuals to be changed

New Stage 3 tax cuts proposed 

From 1 July 2024, the government proposes to:

• reduce the 19% tax rate to 16% for incomes between $18,200 and $45,000

• reduce the 32.5% tax rate to 30% for incomes between $45,000 to a new $135,000 threshold

• increase the threshold at which the 37% tax rate applies from $120,000 to $135,000, and

• increase the threshold at which the 45% tax rate applies from $180,000 to $190,000.      

The tax thresholds and rates proposed to apply from 2024—25 are as follows. 

The current tax thresholds and rates for 2023—24 are as follows.

Legislated Stage 3 tax cuts to be scrapped 

The government will not proceed with the Stage 3 tax cuts enacted by Act No 47 of 2018 and Act No 52 of 2019 that were due to take effect from 1 July 2024. The legislated Stage 3 tax cuts were as follows: 

• a 30% tax rate was to apply to an individual’s ordinary taxable income between $45,001 and $200,000 (rather than $87,000, $90,000 or $120,000) 

• a 45% was to apply to an individual’s ordinary taxable income exceeding $200,000 (rather than $180,000), and

• the 37% rate of income tax was to be abolished. 

Medicare levy threshold to be increased 

In addition, the Medicare levy low-income thresholds for 2023−24 will be increased.

The Medicare levy applies a 2% charge to most taxpayers; however it is gradually charged when a single person earns between $24,276 and $30,345 per annum. Note that the thresholds for families and pensioners differ depending on your family circumstances.

The proposed thresholds will rise to $26,000 and $32,500.

Source: Prime Minister, Treasurer and Minister for Finance, Tax cuts to help Australians with the cost of living, [joint media release], 25 January 2024, accessed 25 January 2024.