The federal government has officially released amendments to Stage 3 income tax cuts, saying that cost-of-living pressures has forced it to do so.
Among the changes, Treasury is proposing to reduce the 19% tax rate to 16% and increase the threshold for the 37% tax rate from $120,000 to $135,000.
The stage 3 tax cuts won’t come into affect until 1 July 2024. All Australians will get a tax cut, but for many on higher incomes it will be a smaller tax cut than they were expecting as per the previous Stage 3 tax cuts.
The Morrison government’s Stage 3 tax cuts passed parliament in 2019. This removed the 37% tax bracket for those earning between $120,000 and 180,000, increased the top tax bracket from $180,000 to $200,000, and lowered the 32.5% marginal tax rate to 30%.
The stage-three tax cuts predominantly benefited those on higher incomes. But the changes passed by the federal cabinet will see the distribution change, with households on middle incomes the biggest beneficiaries.
Middle and high middle income households – with average annual incomes of $97,000 and 136,000 respectively – will get the largest average gains at tax time.
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