The 2024 Federal Budget was delivered by Treasurer Jim Chalmers on 14 May 2024. One of the main themes of the Federal Budget was easing cost of living pressures with the most significant headline item being the passage of the revised stage 3 tax cuts for individual taxpayers that commence from 1 July 2024.
The revisions to the stage 3 tax cuts are already legislated and there were no further changes announced.
The current marginal tax rates for Australian resident taxpayers are as follows:
| Taxable Income bracket: | Tax rate: |
| 0−$18,200 | 0 |
| $18,201−$45,000 | 19% |
| $45,001−$120,000 |
32.5% |
| $120,001−$180,000 | 37% |
| >$180,000 |
45% |
(Plus, Medicare Levy of 2% where applicable)
The previously enacted Morrison Government stage 3 tax cuts took out the 37% tax rate for middle income earners. Instead, there would have been a 30% rate on incomes between $45,001 and $200,000 and a 45% rate on incomes over $200,000 (plus the 2% Medicare Levy where applicable).
The biggest winners of the original stage 3 tax cuts would have been Australia’s highest income earners who paid tax at top tax bracket rates. For example, an individual earning $200,000 per annum would have been paid $9,075 less annual income tax. By contrast, a person earning a $100,000 would only have paid $1,375 less in tax, and someone earning $50,000 would only have received a tax cut of $125.
On 25 January 2024 the Albanese government announced it would scale back the stage 3 tax cuts in a way that would push the benefits away from those on the highest income brackets towards to lower and middle-income earners.
Under the revised stage 3 tax cuts:
The 19 percent tax rate will be reduced to 16 percent.
The 32.5 percent tax rate is reduced to 30 per cent.
The income threshold, above which the 37 per cent tax rate applies, will be increased from $120,000 to $135,000.
The income threshold, above which the 45 per cent tax rate applies, will be increased from $180,000 to $190,000.
These revisions to the stage 3 tax cuts were passed by the House of Representatives and the Senate unamended on 27 February 2024.
From 1 July 2024 onwards the revised resident tax rates will be as follows:
| Taxable Income bracket: | Tax rate: |
| 0−$18,200 | 0 |
| $18,201−$45,000 | 16% |
| $45,001−$135,000 |
30% |
| $135,001−$190,000 | 37% |
| >$190,000 |
45% |
(Plus, Medicare Levy of 2% where applicable)
In Jim Chalmers’ Federal Budget speech, he proclaimed that from 1 July 2024 “all 13.6 million Australian taxpayers would now get a tax cut” and that “84% of taxpayers, and 90% of women” would get a bigger tax cut than they would have under the original stage 3 tax cuts proposed by the previous government.
The Government has stated that the average tax cut to be received by Australian taxpayers will be $1,888 from 1 July 2024.
Australia’s highest income earners lose out significantly from the revisions made to the stage 3 tax cuts. From 1 July 2024 a person earning $200,000 per annum will still pay $4,529 less income tax, but that is $4,546 more tax than they would have under the originally enacted stage 3 tax cuts.
Other tax-related measures announced in the Federal Budget under the umbrella of easing the cost of living pressures included:
An increase to the Medicare levy low-income thresholds for singles, families, and seniors from 1 July 2023.
A release of $3 billion in student debt for around 3 million Australians, by way of backdating a reduction in the HELP indexation rate from 2023.
The 2024 Australian Federal Budget confirms the already announced tax cut changes that many Australians will soon benefit from. From 1 July 2024 all Australian workers will start seeing an increased after- tax pay packet.
Under the revised stage 3 tax cuts the overall benefit of the personal income tax cuts is shared more evenly across Australia’s taxpaying population. The highest income earners still get the most tax relief, but not nearly as much as they were set to get under the original stage 3 tax cut proposals.
For more information on the Federal Budget, explore at our detailed summary. If you’d like further assistance, contact your Crowe advisor or fill out this form to reach out.