Yahoo Finance Budget 2023: Millions of Aussies getting tax cut
The federal government will go ahead with the legislated stage three tax cuts.
Millions of Aussies are set to receive a tax break after the controversial stage three tax cuts were left untouched in the federal budget.
The cuts, which will come into effect from July next year, will mean everyone who earns between $45,000 and $200,000 will pay the same marginal tax rate of 30 per cent.
The changes will remove the current 37 per cent tax bracket, lower the 32.5 per cent bracket to 30 per cent, and lift the threshold for the top 45 per cent bracket from $180,001 to $200,001.
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Treasurer Jim Chalmers recently told ABC radio the tax cuts would not be called out in the budget because the decision had already been legislated.
“The budget itemises the new decisions, and our position on that hasn’t changed,” he said.
The cuts are estimated to cost the budget $20 billion a year from mid-2024, according to the Grattan Institute, rising to $31 billion by 2030.
What are the new tax rates?
Currently, the tax rates are:
$18,200 - no tax
$18,201 to $45,000 - 19 per cent
$45,001 to $120,000 - 32.5 per cent
$120,001 to $180,000 - 37 per cent
$180,001 plus - 45 per cent
From July 2024, the new tax rates will be:
$18,200 - no tax
$18,201 to $45,000 - 19 per cent
$45,001 to $200,000 - 30 per cent
$200,001 plus - 45 per cent
How big will my tax cut be?
Aussie taxpayers earning more than $45,000 will benefit from the tax cuts, but the benefit will mainly go to higher-income earners.
For example, someone earning $60,000 will receive a $375-per-year tax cut, while someone earning $90,000 will receive a $1,125 annual tax cut.
Anyone earning $200,000 and above will get a tax cut of $9,075 per year, while those earning $45,000 or less will get nothing.
What about the $1,500 tax hike?
The government did not extend the low and middle income tax offset (LMITO) in the federal budget.
The LMITO came to an end on June 30, 2022 and gave people earning less than $126,000 a tax offset of up to $1,500.
The offset was initially introduced by the Coalition government as stage one of the government's original three-stage tax overhaul. It was only ever meant to be a temporary measure, but was extended during COVID and to help ease cost-of-living pressures.
During last year’s federal budget, the former Coalition government decided to increase the maximum tax offset from $1,080 to $1,500.
When will the tax changes kick in?
The stage three tax cuts will come into effect from July 1, 2024.
The last year you can receive the LMITO was the 2021-2022 income year, it does not apply to the 2022-2023 income year.
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