Proposed Adjustments to 2024 Tax Cuts: What You Need to Know

Word Tax cut by scissors

In a recent development, the Federal Government has unveiled a proposal to reshape and redistribute the legislated personal income tax cuts scheduled to commence on 1 July 2024. This move aims to provide increased relief to lower-income households that have faced challenges due to rising living costs. While the announcement has sparked anticipation, it’s essential to understand the key changes and their potential impact.

Under the proposed redesign, all resident taxpayers with taxable income under $146,486 will experience a more substantial tax cut compared to the existing Stage 3 plan. Notable examples include:

  • Individuals with a taxable income of $40,000 will receive a $654 tax cut, a significant improvement over the current Stage 3 plan.
  • Those earning $100,000 will enjoy a $2,179 tax cut, an $804 increase from the original Stage 3 plan.
  • However, individuals earning $200,000 will witness a reduction in the expected benefit, from $9,075 to $4,529, although there is still a noticeable advantage compared to current tax rates.

The proposed changes also include a 7.1% increase in the Medicare Levy low-income thresholds, providing additional relief for low-income earners. The threshold is expected to rise to $32,500, up from $26,000, before individuals start paying the 2% Medicare Levy.

While the redesign aims for broad revenue neutrality compared to the existing Stage 3 plan, it is anticipated to cost approximately $1 billion more over the next four years before bracket creep diminishes the gains.

To implement the redesigned Stage 3 tax cuts by 1 July 2024, the Government must swiftly enact amending legislation, securing support from independents or minor parties in Parliament.

Originating in the 2018-19 Federal Budget, the personal income tax plan aimed to combat ‘bracket creep.’ The three-stage plan began rolling out from 1 July 2018, with the final stage initially set for 1 July 2024.

As the proposed changes are contingent on legislative approval, uncertainties linger. The Government must navigate the parliamentary process swiftly to make the redesigned Stage 3 tax cuts a reality.

If you have any concerns or seek clarification regarding the potential impact of the proposed changes, feel free to contact Avance Chartered Accountants at 1300 620 345.

The proposed adjustments to the 2024 tax cuts signal a shift in focus towards supporting lower-income households. As the legislative process unfolds, staying informed and seeking professional advice is crucial for individuals navigating these changes.