The Federal Government announced that they will amend the legislated Stage 3 Tax Cuts that are scheduled to begin on 1 July 2024.
Why? They decided to redistribute some of the planned tax savings for higher income earners to lower income earners, to assist them with cost-of-living pressures.
SUMMARY OF THE CHANGES
These are the planned changes to tax rates for 2025:
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 proposed tax saving 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% - which is 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 $1,125 under the original Stage 3 Tax Cuts.
While the original Stage 3 Tax Cuts have been legislated, the updated Stage 3 Tax Cuts still need to be agreed to by Federal Parliament.
REDUCING YOUR TAX + PLANNING FOR YOUR TAX PAYMENTS
Here is the order of the key tax planning services we recommend for you over the coming months:
In May 2024 we’ll consider strategies to reduce your tax after the Federal Budget.
In May/June 2024, we can provide you with a Tax Planning Report that will give you specific actions to reduce your tax, including the best way to spread business profits across family members to provide for their needs.