Stage 3 tax cuts are coming. July 1st to be exact.
So what do these newly implemented changes mean for you, and why the changes?
The Albanese government has recently announced tweaks to the Stage 3 tax cuts which see the redestribution of planned tax savings from the highest income bracket to lower income earners.
We are seeing tax breaks taken away from the highest income earners and instead, greater relief applied to those doing it the toughest.
All in the name of one end goal – to assist hard-working Australians with the cost of living crisis.
So let’s first look at the changes in store for the 2024-25 tax year.
It’s important to note that the original Stage 3 Tax Cuts have been legislated however still need to be agreed to by the Federal Parliament.
2024-25 Stage 3 Tax Changes
Here’s a breakdown of the original cuts versus the recently announced updated Stage 3 cuts, due to be implemented July 1, 2024.
|
Current Tax Rates |
Original Stage 3 Tax Cuts | Redesigned Stage 3 Tax Cuts | |||
|
2024 Income |
2024
Tax Rate |
2025 Income | 2025
Tax Rate |
2025 Income |
2025 Tax Rate |
|
$0 – $18,200 |
0% | $0 – $18,200 | 0% | $0 – $18,200 | 0% |
|
$18,201 – $45,000 |
19% | $18,201 – $45,000 | 19% | $18,201 – $45,000 |
16% |
|
$45,001 – $120,000 |
32.5% | $45,001 – $200,000 | 30% | $45,001 – $135,000 |
30% |
|
$120,001 – $180,000 |
37% | $135,001 – $190,000 |
37% |
||
| >$180,000 | 45% | >$200,000 | 45% | >$190,000 |
45% |
As a result of these changes:
- High-income earners (earning $200,000) will have their tax savings slashed from $9,075 to $4,529.
- Individuals earning under $45,000 and not eligible for the original State 3 Tax Cuts will now benefit, with a tax rate of 16% being reduced from 19% (worth a maximum of $804 for someone earning $45,000 or above).
- An individual earning $90,000 will receive a tax cut of $1,929 (up from the original plan of $1,125).
So where to from here?
The most important thing you can do in the lead-up to June 2024, is to book a tax planning session to look over your financial position and implications of the new stage 3 tax cuts.
These tax planning appointments can help by:
- Forecasting your expected 2024 income and tax payable
- Develop strategies to ‘spread’ your income in the most tax-effective way
- Advice regarding tax reduction strategies
It’s important to look at your tax planning well in advance of June 30 to allow for any tax-reducing strategies to be put into place.
If you’d like to discuss your 2024 tax planning, get in touch with us and make an appointment for a tax planning discussion prior to June 30.
