A Breakdown of Stage 3 Changes
The Federal Government unveiled a proposal to realign and redistribute the personal income tax cuts, benefiting more Australian taxpayers. This means many of us can expect a larger take-home pay from July 2024, although some may find the change slightly less favourable. These redesigns shift the focus towards assisting lower-income households suffering from the increasing cost of living pressures.
The current, legislated, and redesigned Stage 3 tax rates for Australian resident taxpayers
Who stands to gain?
Under the proposed scheme, all resident taxpayers with an annual taxable income of less than $146,486 are set to enjoy a larger tax cut. For instance, an individual earning $40,000 per year will now be eligible for a tax cut of $654, compared to no tax cut under the current plan. Those earning $100,000 annually will receive a tax cut of $2,179 - $804 more than the existing scheme!
What about high-income earners?
While there are benefits for low to mid-income earners, individuals earning $200,000 will see the Stage 3 plan's benefits reduced to approximately half from $9,075 to $4,529.
Additional relief for low-income earners
The redesign also proposes a 7.1% increase in the Medicare Levy low-income thresholds in response to inflation. This implies that individuals will start paying the 2% Medicare Levy only when their income crosses $32,500, up from the current $26,000.
A look back at Stage 3 plan's history
Initially announced in the 2018-19 Federal Budget, the personal income tax scheme was designed to tackle 'bracket creep.' This refers to the failure of tax rates to keep pace with wage growth, leading to individuals paying more tax over time.
These changes hinge on the enactment of amended legislation by the government, requiring the support of independents or minor parties to pass through Parliament.
Do remember, nothing is set in stone yet!
Got concerns? We're here to help!
If you're worried about how this proposal might impact your finances, don't hesitate to contact us. As financial experts, our goal at Lead Advisory Group is to guide you through these changes, ensuring you maximise your benefits and minimise your tax burden.