Tax cuts have been a recurring topic in political discussions, often shaping fiscal policies and influencing government revenue. The Stage 3 Tax Cuts introduced by the Morrison government in 2019 have been a point of contention and scrutiny, with promises and commitments surrounding their implementation. In this article, we aim to provide an impartial overview of the Stage 3 Tax Cuts, highlighting key aspects and the proposed changes by the Albanese Labor Government.
What Were The Stage 3 Tax Cuts?
The Morrison government’s Stage 3 Tax Cuts, passed in 2019, removed the 37% tax bracket for incomes between $120,000 and $180,000. It also increased the top tax bracket from $180,000 to $200,000 and lowered the 32.5% marginal tax rate to 30%. These changes were aimed at providing tax relief to various income groups, particularly benefiting middle and high-middle-income households with average annual incomes of $97,000 and $136,000, respectively.
Initial Commitments and Promises
During the last election, Labor committed to keeping the Morrison government’s Stage 3 Tax Cuts, ensuring continuity in the tax landscape. The tax cuts were designed to offer relief to individuals across different income brackets, with promises to reduce the 19% tax rate, decrease the 32.5% tax rate, and raise the thresholds for higher tax brackets.
The Albanese Labor Government’s Changes
From July 1, 2024, the Albanese Labor Government has outlined several adjustments to the tax system. These proposed changes include:
- Reducing the 19% tax rate to 16% (for incomes between $18,200 and $45,000).
- Reducing the 32.5% tax rate to 30% (for incomes between $45,000 and the new $135,000 threshold).
- Increasing the threshold at which the 37% tax rate applies from $120,000 to $135,000.
- Increasing the threshold at which the 45% tax rate applies from $180,000 to $190,000.
As a result of these changes, all 13.6 million taxpayers are expected to receive a tax cut. The proposed tax cuts aim to provide relief to a broad spectrum of taxpayers, from those with average incomes to higher-income individuals.
New Personal Tax Rates & Thresholds For 2024-25
Current Tax Rates
| 0 – 18,200 | Tax-Free |
| 18,201 – 45,000 | 19% |
| 45,001 – 120,000 | 32.5% |
| 120,001 – 180,000 | 37% |
| Greater than 180,001 | 45% |
New Tax Rates From 2024-2025
| 0 – 18,200 | Tax-Free |
| 18,201 – 45,000 | 16% |
| 45,001 – 135,000 | 30% |
| 135,001 – 190,000 | 37% |
| Greater than 190,001 | 45% |
Comparative Tax Cut Figures
Under the current plan, the tax cuts are projected to be as follows:
- A person on an average income of around $73,000 will receive a tax cut of $1,504.
- A person earning $40,000 will get a tax cut of $654.
- A person earning $100,000 will receive a tax cut of $2,179.
- A person earning $200,000 will still get a tax cut, which will be $4,529.
The Stage 3 Tax Cuts have been a focal point of tax policy discussions, with implications for individuals across various income brackets.
The Morrison government’s initial implementation and Labor’s commitment to maintaining and adjusting these cuts demonstrate the complexities involved in shaping tax policies. As changes are proposed and debated, it is crucial for taxpayers to stay informed about how these policies may impact their financial situations.
