Changes are inevitable in life. From July 1, 2024, the Australian tax system has gone through major changes with the introduction of Stage 3 tax cuts.These changes aimed to help workers save more money, proving especially beneficial for low and middle-income earners by reshaping tax rates and income thresholds in targeted ways. If you are an Australian, what do the Stage 3 tax cuts mean for you? Here is how an expert tax agent Castle Hill associated to a company like Prowess Business Advisers will help you understand everything in a better way.
What is the Stage 3 Tax Cuts?
The Federal Government originally legislated the Stage 3 tax cuts in 2018 to simplify the tax system and reduce tax rates. However, they adjusted these cuts in response to inflation, cost-of-living pressures, and rising interest rates. The government made these adjustments to provide better support for Australians across various income levels.
From July 1, 2024, these changes took effect. For Australians, it meant that they could take more money back home. As these tax cuts have no direct impact on either tax returns or refunds, these can just reduce the amount of tax withheld from pay throughout the year.
How the Tax Brackets Changed?
Take a look at what is new in tax brackets 2025:
- Reduction in marginal tax rate from 19% to 16% for workers earning between $18,201 and $45,000.
- This rate will drop again to 15%, beginning from 1 July 2026, and eventually to 14% in 2027.
- Shift in the 32.5% bracket, now applying to income up to $135,000, with the tax rate reduced to 30%.
- The government has retained the 37% tax bracket, which was originally set to be scrapped, covering incomes between $135,001 and $190,000.
- Incomes more than $190,001 will stay in the 45% bracket.
The tax table 2025 reflects such changes, showing the way how most Australians can see extra take-home pay for themselves.
What is the Impact of Stage 3 Tax Cuts on Australian Workers?
Check some examples to understand how the tax cuts are supposed to affect you:
- Retail worker earning $65,000: Reduction in taxes from $12,867 to $11,563, allowing workers an additional $25.07 per week.
- Teacher earning $95,000: Drop in taxes from $23,242 to $21,188, allowing $39.50 savings per week.
- Doctor earning $156,000: Reduction of taxes from $45,907 to $42,178, ensuring $71.71 higher weekly pay.
Most workers, across the board, now manage to have a little more in their pay packets. The tax cuts are making it convenient for them to ease their ongoing cost-of-living pressures.
Why Were the Changes Made?
High-income earners were the ones to benefit a lot from the original Stage 3 cuts. However, the Government considered the existing economic climate of Australia, with higher inflation, mounting household costs and rising interest rates making life difficult economically.
Thus, it redesigned the cuts to give broader relief. The government adjusted the tax brackets and lowered rates for lower and middle-income workers. These changes aimed to create more fairness in the Australian tax system while still offering some benefits to higher earners.
How Do the Cuts Affect Your Tax Return?
Your refund does not get a boost due to the Stage 3 tax cuts. Instead, you will have less tax withheld from your income throughout the year.
While you do not get a bigger refund at tax time, you can definitely draw a higher regular pay.
Looking Ahead: The 2026/27 Updates
The Government has already flagged further cuts in the 2026/27 financial year. Those earning $45,000 or more around can save $268 annually, with the lowest bracket poised to drop from 16% to 15%.
Annual savings for the same income group will rise to $536 by 2027/28, with the lowest bracket reduced further to 14%.
Such ongoing adjustments will allow Australians to expect gradual increases in their take-home pay, in the years to come.
Final Words
In case you have not managed to see any rise in your pay since July 2024, check with your employer. Find out whether he / she is applying the correct rates. It might be better for you to consult an expert tax agent Castle Hill from Prowess Business Advisers for further clarity. He can help you to make sure that your payroll and tax withholdings are accurate.