Taxable income before and after Stage 3 tax cuts
Published on: 1 Sep 2022
The details below have been reviewed as correct and current as of January 2024.
The stage 3 tax cuts were legislated in 2018 and are set to come into effect for the 2024-25 income year. The below data outlines the tax liability at different income levels before and after the stage 3 tax cuts.
The Tax Institute's Tax Counsel, Julie Abdalla, FTI, says, ‘The stage 3 tax cuts and all the attention they have garnered has brought to light broader issues with our tax system. In particular, it highlights an overreliance on personal income taxes that needs to be addressed.’
‘Simply abandoning this stage of the tax cuts will not resolve the underlying problems in our tax system. We need to be looking at overall reform if we want fair outcomes for all Australian taxpayers. That includes discussion of the tax mix and what sources we rely on for our tax revenue.’
For more commentary on stage 3 tax cuts, please see: Debate over tax cuts “pointless” without seeing the big picture.
Comparison of taxable incomes before and after Stage 3 tax cuts
2023-24 tax rates
| Index | Taxable income | Cumulative tax liability | Marginal tax rate |
| 1 | $0 | - | 0% |
| 2 | $18,200 | - | 19% |
| 3 | $45,000 | $5,092 | 32.50% |
| 4 | $120,000 | $29,467 | 37% |
| 5 | $180,000 | $51,667 | 45% |
Stage 3 tax rates
| Index | Taxable income | Cumulative tax liability | Marginal tax rate |
| 1 | $0 | - | 0% |
| 2 | $18,200 | - | 19% |
| 3 | $45,000 | $5,092 | 30.00% |
| 4 | $200,000 | $51,592 | 45% |
Tax Liability
| Income | 2023-24 index | 2022-23 | Stage 3 Index | 2024-25 | Difference - with Stage 3 tax cuts | Difference - with updated proposed Stage 3 tax cuts |
| $40,000 | 2 | $4,142 | 2 | $4,142 | - | $654 |
| $50,000 | 3 | $6,717 | 3 | $6,592 | $125 | $929 |
| $60,000 | 3 | $9,967 | 3 | $9,592 | $375 | $1,179 |
| $70,000 | 3 | $13,217 | 3 | $12,592 | $625 | $1,429 |
| $80,000 | 3 | $16,467 | 3 | $15,592 | $875 | $1,679 |
| $90,000 | 3 | $19,717 | 3 | $18,592 | $1,125 | $1,929 |
| $100,000 | 3 | $22,967 | 3 | $21,592 | $1,375 | $2,179 |
| $110,000 | 3 | $26,217 | 3 | $24,592 | $1,625 | $2,429 |
| $120,000 | 4 | $29,467 | 3 | $27,592 | $1,875 | $2,679 |
| $130,000 | 4 | $33,167 | 3 | $30,592 | $2,575 | $3,379 |
| $140,000 | 4 | $36,867 | 3 | $33,592 | $3,275 | $3,729 |
| $150,000 | 4 | $40,567 | 3 | $36,592 | $3,975 | $3,729 |
| $160,000 | 4 | $44,267 | 3 | $39,592 | $4,675 | $3,729 |
| $170,000 | 4 | $47,967 | 3 | $42,592 | $5,375 | $3,729 |
| $180,000 | 5 | $51,667 | 3 | $45,592 | $6,075 | $3,729 |
| $190,000 | 5 | $56,167 | 3 | $48,592 | $7,575 | $4,529 |
| $200,000 | 5 | $60,667 | 4 | $51,592 | $9,075 | $4,529 |
| $210,000 | 5 | $65,167 | 4 | $56,092 | $9,075 | $4,529 |
| $220,000 | 5 | $69,667 | 4 | $60,592 | $9,075 | $4,529 |
| $230,000 | 5 | $74,167 | 4 | $65,092 | $9,075 | $4,529 |
| $240,000 | 5 | $78,667 | 4 | $69,592 | $9,075 | $4,529 |
| $250,000 | 5 | $83,167 | 4 | $74,092 | $9,075 | $4,529 |
Key Assumptions
- The income is the taxpayers assessable income, net of any deductions.
- This model does not account for the Medicare Levy, Medicare Levy Surcharge or other tax offsets the taxpayer may be eligible to receive.
- This model does not account for any HELP loan repayments the taxpayer may be required to make (if any).
- Taxpayer is an Australian tax resident in both income years.
- All numbers are rounded to the nearest dollar.
Example scenarios
Key Assumptions
The scenarios below all operate under the following assumptions:
- The taxpayer has no other income;
- The taxpayer has no losses in the prior, current or future years;
- The taxpayer is not eligible for any deductions;
- Taxpayer is a tax resident of Australia for the entirety of the relevant income years;
- The taxpayer is not eligible for any rebates or offsets;
- The taxpayer does not have any government student or support loans;
- Medicare levy and Medicare levy surcharge have not been factored in or calculated;
- Any resultant rebates (e.g. private health insurance rebates) have not been factored in;
- The tax rates for the relevant years are as extracted below; and
- The tax-free threshold is $18,200.
Tax rates 2023-24 income year1
Tax rates for resident taxpayers for the 2020-21, 2021-22, 2022-23 or 2023-24 year of income | ||
Item | For the part of the ordinary taxable income of the taxpayer that: | The rate is: |
1 | exceeds the tax-free threshold but does not exceed $45,000 | 19% |
2 | exceeds $45,000 but does not exceed $120,000 | 32.5% |
3 | exceeds $120,000 but does not exceed $180,000 | 37% |
4 | exceeds $180,000 | 45% |
Tax rates for 2024-25 income year2
Tax rates for resident taxpayers for the 2024-25 year of income or a later year of income | ||
Item | For the part of the ordinary taxable income of the taxpayer that: | The rate is: |
1 | exceeds the tax-free threshold but does not exceed $45,000 | 19% |
2 | exceeds $45,000 but does not exceed $200,000 | 30% |
3 | exceeds $200,000 | 45% |
Scenario 1
Single taxpayer earns $120,000 in both income tax years. Tax payable in the 2023-24 income year is calculated as follows:
Tax Payable | = $0 + $5,092 + $24,375 |
= $29,467 |
Tax payable in the 2024-25 income year is as follows:
Tax Payable | = $0 + $5,092 + $22,450 |
= $27,592 |
Noting the assumptions above, the taxpayer will pay $1875 less tax in the 2024-2025 income year compared to the 2023-24 income year.
Scenario 2
Single taxpayer earns $160,000 in both income tax years. Tax payable in the 2023-24 income years is calculated as follows:
Tax Payable | = $0 + $5,092 + $24,375 + $14,800 |
= $44,267 |
Tax payable in the 2024-25 income year is calculated as follows:
Tax Payable | = $0 + $5,092 + $34,500 |
= $39,592 |
Noting the assumption above, the taxpayer will pay $4,675 less tax in the 2024-2025 income year compared to the 2023-24 income year.
Scenario 3
Household of two where taxpayer 1 earns $120,000 in both income years and taxpayer 2 earns $80,000 in both income years. Tax payable for taxpayer 1 in the in the 2023-24 income year is the same as scenario 1 above. Tax payable for taxpayer 2 in the 2023-24 income year is calculated as below:
Tax Payable | = $0 + $5,092 + $11,375 |
= $16,467 |
Tax payable by taxpayer 1 in the 2024-25 income year is the same as scenario 1 above. Tax payable for taxpayer 2 in the 2024-25 income year is calculated as below:
Tax Payable | = $0 + $5,092 + $10,500 |
= $15,592 |
This means that taxpayers 1 & 2 will pay a combined amount of $45,934 in tax in the 2023-24 income year, and $43,184 in the 2024-25 income year.
As a result, the combined amount of tax paid in the 2024-25 income year will be $2,750 less than the 2023-24 income year.
1 Subsection 12(1) of Schedule 7 of the Income Tax Rates Act 1986 (Cth).
2 Subsection 12(1) of Schedule 7 of the Income Tax Rates Act 1986 (Cth).
Other media releases
-
ATO casts the NALI net too wide says Joint Bodies -
Tax reform heavyweights weigh in on the path to lasting change in our system -
The Tax Institute COVID-19 response