**It is confirmed that the Stage 3 tax cut changes take effect from 1 July 2024. For more details, please refer to the treasury website.
Most readers are aware of the federal government’s proposed changes to the yet-to-be-implemented stage 3 tax cuts. To understand these changes better, it’s crucial to analyse them in relation to the current tax rates (applicable for the current financial year) and the stage 3 tax cuts legislated by the former federal government.
The changes being proposed by the current federal government are illustrated by the following tables:
Resident Individual Tax Rates 2020–21 to 2023–24 (The Current Year)
Resident Individual Tax Rates 2024–25 — Currently Legislated Stage 3 Tax Plan
(Legislated by the Former Federal Government)
Resident Individual Tax Rates 2024–25 — Proposed Revised Stage 3 Tax Plan
(Proposed by the Current Federal Government)
Let’s focus on the specific changes outlined in the last table. While all taxpayers will experience a tax cut in comparison to 2023–24, those with taxable incomes around $147,000 (the pivot point) or more will see a reduced tax cut under the proposed changes, compared to the current legislated rates. For instance, with a taxable income of $146,000, the tax liability is $35,392 under current law versus $35,358 under the proposed changes (a $34 benefit). On $147,000, the tax liability is $35,692 under current law versus $35,728 under the proposed changes (a $36 detriment).
In making these points, the federal Treasurer suggests that the proposed revisions aim to provide both relief and reform to Australia’s tax system.
How Will This Affect Me?
The following table outlines various income levels together with the current tax payable, currently legislated tax cuts and proposed tax cuts.
Global Perspective
It can be interesting to compare tax rates from around the world. Whilst a full comparison is beyond this article’s scope, merely considering the top tax rates for individuals can provide some useful insights. LZR’s international tax specialist, Michael Van Schaik, provides examples:
- The USA has a top rate of 37% which kicks in at USD578,125 (approx. AUD875,000).
- The UK has a top rate of 45% at GBP 125,140 (approx. AUD242,000).
- Japan (our closest major trading partner) has a top rate of 40% at YEN 40,000,000 (approx. AUD415,000).
- Comparisons with the EU and similar jurisdictions are complex due to additional taxes that affect the headline top marginal rate figure.
This is important, especially considering talent mobility in a landscape where remote work is a reality.
Next Step
What is clear is that whatever changes are made to the current tax rates, it is important for you to understand the impact. If you have questions or need guidance, feel free to contact us.
