Stage 3 tax cuts are here - sort of
On 27 February 2024, the stage 3 tax cuts passed parliament, with effect from 1 July 2024.
From 1 July 2024, the revised Stage 3 tax cuts will:
- reduce the 19 per cent tax rate to 16 per cent
- reduce the 32.5 per cent tax rate to 30 per cent
- increase the threshold above which the 37 per cent tax rate applies from $120,000 to $135,000
- increase the threshold above which the 45 per cent tax rate applies from $180,000 to $190,000.
There will be no change to the current tax-free threshold of $18,200 or the tax-free threshold of $416 on eligible income under the taxation of minors rules.
While no tax payer will pay more tax under the changes, higher income earners (those over $180,000) will not receive as much of a reduction as they would have under the previous proposals.
The table below sets out the new tax rates, effective 1 July 2024.
| Taxable Income | Marginal Rates | Tax Liability Calculation |
|---|---|---|
|
$0 - $18,200 |
0% |
$nil |
|
$18,201 - $45,000 |
16% |
16% of excess over $18,201 |
|
$45,001 - $135,000 |
30% |
$4,288 + 30% of excess over $45,000 |
|
$135,001 - $190,000 |
37% |
$31,288 + 37% of excess over $135,000 |
|
$190,001 + |
45% |
$51,638 + 45% of excess over $190,000 |
What do Stage 3 tax cuts mean for me?
Well, to put it simply for most people in business it will mean less of a tax cut.
This just means more of a need to carefully plan your year end tax. Whether its looking at (legitmate) ways to defer income or bring forward expenses, getting an efficient tax plan set up early makes more sense than ever.
