Will the Stage 3 tax cuts affect your finances?

The good news is that anyone earning up to about $145,000 will receive a tax cut  greater than the one originally legislated back in 2018. That’s roughly 90% of Australian taxpayers who will receive a cut of up to $3,729 a year.  

For many, this relief will help to offset rising cost-of-living pressures and take some of the sting out of the weekly shop.

But if you’re in a position to invest and would prefer to put this extra cash to work over the long run, we’ve had a look at what options (and returns) you could receive if you have an extra $100 per month to invest.

These estimates are for illustrative purposes only and are calculated using CFS modelling with the above assumptions.

Or, if you already have a regular investment plan set up you could contribute more money to this to help grow your portfolio faster and potentially generate better returns over the longer term. 

Find out more about investing with CFS.

Initially, the 37% tax rate was set to be abolished under Stage 3 and anyone earning between $45,001 and $200,000 would have been taxed at 30% instead. The revised plan has instead retained the 37% rate for those earning between $135,000 and $190,000.

Anyone earning more than $190,000 will continue to be taxed at 45%.

The table below breaks down each tax rate under the new system by income level, as well as the estimated share of taxpayers that fall into each group. 

Source: Grattan Institute¹

The Stage 3 tax cuts were first legislated in 2018 as part of the Coalition government’s three-part Personal Income Tax Plan, which was designed to reduce Australians’ personal income tax rates gradually over a seven-year period.²

In its original form, Stage 3 of this plan was set to deliver higher tax cuts to Australians on higher incomes. The plan was eventually passed by Parliament in 2018.

Despite receiving parliamentary approval, Stage 3 of the plan remained controversial and in January 2024, the current Labor government unveiled an amended plan which delivered additional tax relief to lower income earners. This is the version set to be implemented in July 2024.

Many high-income earners will still receive a tax cut under this revised plan, however the size of that cut may be smaller than it would previously have been.