It’s not a sure thing yet!
The Government will need to quickly enact amending legislation to make the redesigned Stage 3 tax cuts a reality by 1 July 2024. This will involve garnering the support of the independents or minor parties to secure its passage through Parliament – Parliament sits from 6 February 2024.
How did we get here?
First announced in the 2018-19 Federal Budget, the personal income tax plan was designed to address the very real issue of ‘bracket creep’ – tax rates not keeping pace with growth in wages and increasing the tax paid by individuals over time. The three-point plan sought to restructure the personal income tax rates by simplifying the tax thresholds and rates, reducing the tax burden on many individuals and bringing Australia into line with some of our neighbours (i.e., New Zealand’s top marginal tax rate is 39% applying to incomes above $180,000).
The three-point plan introduced incremental changes from 1 July 2018 and 1 July 2020, with stage 3 legislated to take effect from 1 July 2024.
The three stages of reform
| Tax rate | Stage 1 | Stage 2 | Stage 3 legislated | Stage 3 redesigned |
| 0% | $0 – $18,200 | $0 – $18,200 | $0 – $18,200 | $0 – $18,200 |
| 16% | $18,201 – $45,000 | |||
| 19% | $18,201 – $37,000 | $18,201 – $45,000 | $18,201 – $45,000 | |
| 30% | $45,001 – $200,000 | $45,001 – $135,000 | ||
| 32.5% | $37,001 – $90,000 | $45,001 – $120,000 | ||
| 37% | $90,000 – $180,000 | $120,001 – $180,000 | $135,001 – $190,000 | |
| 45% | $180,001 and over | $180,001 and over | $200,001 | $190,001 |
What now?
If you have any concerns about the impact of the proposed changes, please call us to discuss.
For tax planning purposes, for those with taxable income of $150,000 or more, the redesigned Stage 3 tax cuts offer less planning opportunity than the current plan. But, any change in the tax rates is an opportunity to review and reset to ensure you are taking advantage of the opportunities available, and not paying more than you need.
