Changes to personal tax rates announced by the federal government
The federal government has announced an overhaul of the previous Coalition government stage 3 tax cuts and introduced various changes in the personal tax rates that apply from 2024–25 income year onwards. Changing the original course of action, as announced by the previous Coalition Government, the new tax changes aim to focus on low and middle income earners to help with the cost-of-living pressures.
The bills amending income tax rate thresholds, tax rates for individuals and Medicare levy low income thresholds have been introduced in the Parliament and await approval to become law.
The following changes have been announced to the personal tax rates:
The lowest rate of income tax will be reduced form 19 cents in a dollar, down to 16 cents. This means a taxpayer earning $50,000 per year will receive a tax cut worth over $900 a year.
The second tax rate will be cut from 32.5% down to 30% which will apply to an annual income of up to $135,000.
The 37% rate will be retained and will now apply from $135,000 — an increase up from $120,000.
In the first increase since 2008, the threshold for the top tax rate of 45% will also be increased. It will now kick in at $190,000, up from $180,000.
You will receive the following tax cuts, based on your annual income:
| Income (per annum) | Annual tax cut |
|---|---|
| $45,000 | $804 |
| $75,000 | $1,154 |
| $100,000 | $2,179 |
| $150,000 | $3,729 |
| $200,000 - $1,000,000 | $4,529 |
Proposed changes to the low-income Medicare levy threshold
The income threshold at which taxpayers must pay a 2% Medicare levy increases by 7.1%, in line with inflation. The low-income threshold will rise to $26,000, up from the previous benchmark of $24,276. The threshold for seniors and pensioners will increase to $41,089, while families can earn $43,846 before the levy kicks in.
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As the income tax rate is due to fall next income year, bringing forward income tax deductions to the 2023–24 income tax year will provide an increased refund for you as an individual. This must be done in accordance with tax avoidance legislation.
Similarly, where possible it will be beneficial to delay the earning of assessable income to the following income year to take advantage of the lower tax rate. This may include net capital gains and the deferral of business income distributed to an individual from a family trust. As mentioned previously, in relation to allowable deductions, this can only be done after reviewing the possible implications relating to tax avoidance. We can help you determine the tax cuts you may receive based on your current or expected annual income after 1 July 2024.
Please contact our office if you have any questions about this.