The government has confirmed that the Stage 3 tax cuts are in place for most Australian workers as of 1 July 2024. These tax cuts were announced as part of the federal budget and aimed to provide financial relief to Australian workers. 

This article explains the Stage 3 tax cuts, how they affect employees at different income levels, and what you can do about it.

What are the Stage 3 Tax Cuts?

The Stage 3 tax cuts are part of a series of personal income tax changes that have been rolled out since 2018. Here’s what’s changed:

• Tax rates were reduced for almost all Australian workers, simplifying individual income tax rates
• More take-home pay for most employees

These changes simplify the tax system by reducing the number of tax brackets from five to four and increasing the income thresholds for each bracket. 

Here are the new tax rates and thresholds:

These changes apply to taxable income, excluding Medicare Levy, ensuring that low and middle-income taxpayers benefit the most.

The Stage 3 tax cuts will be a welcome boost to the take-home pay of Australian workers, especially those in the middle-income bracket. By reducing the tax rate for those earning between $45,001 and $200,000 from 32.5% to 30%, the government is putting more money back in the pockets of everyday Australians—a welcome relief in the wake of the cost-of-living crisis. 

Impact at Different Income Levels for Middle Income Taxpayers

The Stage 3 tax cuts affect employees at different income levels differently, particularly benefiting middle-income earners. 

Here’s how much extra take-home pay workers in different jobs can hypothetically expect:

These changes are designed to provide significant relief to middle-income taxpayers, who will see a noticeable increase in their take-home pay.

As the table shows, a teacher on $95,000 will get an extra $2,054 in their pocket per year or $39.50 per week. 

Meanwhile, a retail worker on $65,000 will get an extra $1,304 per year or $25.07 per week, and a doctor on $156,000 will get an extra $3,729 per year or $71.71 per week.

These extra dollars can make a big difference to middle-income workers, giving them more financial flexibility and the ability to save, invest, or pay off debts.

What to Do Now

Now that the Stage 3 tax cuts are in place, here’s what employees can do:

1. Check your payslip to see if your employer has applied the new tax rates from the first pay after 1 July 2024, and enjoy the tax relief provided by the Stage 3 tax cuts. Talk to your employer or payroll department if you have any questions or concerns.
2. Think about how you can use the extra take-home pay. This could be:

• Building an emergency fund
• Paying off high-interest debts
• Investing in your future through super or other investment vehicles
• Saving for a specific goal, such as a deposit on a home or a family holiday

3. If you get a big increase in your take-home pay, consider talking to a financial planner or tax professional to make the most of your money.
4. Remember, these tax cuts won’t affect your 2023/24 tax return,  as they only apply to income earned from 1 July 2024 onwards.

Key Takeaways 

• Stage 3 tax cuts are in place for most Australians as of 1 July 2024, impacting their take-home pay for the 2024-25 financial year.
• Employees across the income spectrum will get more take-home pay, with the extra money to save, invest, or pay off debts based on their taxable income.
• Check your payslip to see if your employer has applied the new tax rates, and consider talking to a financial planner to make the most of your increased take-home pay.

Now’s the time to organise your finances. Learn your new take-home pay and start planning. Get in touch with our team to get your taxes on track!