Everything you need to know about the proposed revised Stage 3 Tax Cuts

The reworked Stage 3 tax cuts have just passed the Senate. But what are these tax cuts, and what do they mean for you as an Australian wage earner?  Let us explain this to you in a way you can easily understand.

What are the stage 3 tax cuts?

It’s the third round in a series of tax changes introduced by the then-Coalition government in 2018 and 2019. The first and second stages were implemented a few years ago. Under that legislation, the third stage is due to take effect on July 1 this year. Up until now, it was the expectation, as stated by Mr Albanese, that his government wouldn’t be changing the plan. Until now.

Why the change?

The heavy weighting of the original scheme focussed on the highest incomes and was deemed by the current government as challenging to justify in the current economic climate. Given the disproportionate impact of the cost of living on low and middle-income taxpayers, the adjustment is seen as a means to provide additional financial relief to hard working families.

What are the proposed changes?

The key features include:

• A cut in the 19% tax rate to 16%
• A cut in the 32.5% tax rate to 30%
• Retaining the current 37% tax rate but increasing the threshold for it to apply
• Retaining the current 45% tax rate but increasing the threshold for it to apply
• The highest income earnings will now only get half the benefit they were due to receive

The proposed tax rates would look like this:

How much will I save?

The tax savings have been distributed much more widely. They are now focused on low and middle income taxpayers, who were previously not well served by the tax cuts.