Update 28th February 2024: Labor's tax cuts bill, which includes amendments to reduce the lowest rate of income tax from 19% to 16% and the second lowest from 32.5% to 30%, alongside an increase in the Medicare levy threshold and the top tax threshold of 45%, has successfully passed through the Senate. This move, aimed at delivering broader and better outcomes for all taxpayers, saw support from the Coalition, which has committed to proposing its own tax reform in the next election to include fighting bracket creep and promoting aspiration within the tax system.
Original Article: Set to kick-off from the 1st of July, 2024, the personal income tax cuts have undergone a remodel proposed by the Federal Government. What does this mean for Australian taxpayers? In simple terms, more of us will enjoy the benefits of a personal income tax cut and thus, bigger paychecks come July. The flip side? Some may feel a pinch compared to the previous design.
The Federal Government is looking to tweak the tax system come 1 July 2024 with proposed alterations to the Stage 3 personal income tax cuts. The revamp aims to put more money back into the pockets of Australians, particularly benefiting those on lower incomes. However, there will be some adjustments across the board.
In an effort to soften the impact of cost of living pressures, the modified tax cuts will provide an expanded benefit to those earning under $146,486 annually. Here's what it looks like for different salary brackets:
Moreover, the changes include a rise in tandem with inflation in the Medicare Levy low-income thresholds by 7.1%. This adjustment means individuals won't be liable for the 2% Medicare Levy until their earnings surpass $32,500, up from the former $26,000 threshold.
The current, legislated, and redesigned Stage 3 tax rates for Australian resident taxpayers:
|
Tax rate |
2023-24 |
2024-25 legislated |
2024-25 proposed |
|
0% |
$0 – $18,200 |
$0 – $18,200 |
$0 – $18,200 |
|
16% |
$18,201 – $45,000 |
||
|
19% |
$18,201 – $45,000 |
$18,201 – $45,000 |
|
|
30% |
$45,001 – $200,000 |
$45,001 – $135,000 |
|
|
32.5% |
$45,001 – $120,000 |
||
|
37% |
$120,001 – $180,000 |
$135,001 – $190,000 |
|
|
45% |
>$180,000 |
>$200,000 |
>$190,000 |
However, it's critical to understand that these changes aren't final. The implementation of the proposed Stage 3 tax cuts hinges on the government's ability to pass the necessary legislation before the July deadline. This may require garnering backing from independent or minor party members within Parliament to see these modifications enacted.
For an extensive overview and expert insights into how these tax changes could affect you, several informative resources are available:
Understanding the potential implications of tax changes can be complex. If you're pondering how these reforms might touch your finances, don't hesitate to get in touch. Our team can offer guidance tailored to your unique situation.
Please note, our counsel is general in nature. Before taking any action, it's wise to consult with a professional who can consider your personal objectives, financial circumstances, and needs.
In conclusion, all eyes are on the upcoming legislative developments as the clock ticks towards the 1st of July 2024. Stay informed to make the most of the opportunities that the proposed tax revisions could present for you.
Information is based on updates as of 25 January 2024. For real-time news and the latest developments, keep an eye on reliable sources and financial news outlets.