Stage 3 Tax Cuts Explained: What Changed & Who Benefits
Published by SWIFT ACCOUNTANTS PTY LTD · Last reviewed
From 1 July 2024, Australia's income tax brackets changed significantly under the Stage 3 tax cuts. This guide explains what changed, who gains the most, and how much extra take-home pay Australians are receiving at different income levels.
What Were the Stage 3 Tax Cuts?
The Stage 3 tax cuts were a package of income tax reductions originally legislated as part of a three-stage tax reform plan. Stage 1 and Stage 2 had already been delivered — Stage 3 was the final and largest phase, aimed at reducing tax for middle and upper-middle income earners.
After winning the 2022 election, the Albanese government revised the original Stage 3 plan in early 2024. The revised package, which passed parliament and took effect from 1 July 2024, redistributed more of the tax savings toward lower and middle-income earners, while still delivering meaningful cuts to higher earners.
The two key changes were:
- The 19% tax bracket (from $18,201 to $45,000) was reduced to 16%
- The 32.5% tax bracket (from $45,001 to $120,000) was reduced to 30% and extended to $135,000
Old Brackets vs New Brackets
| Income Range | Old Rate (2023–24) | New Rate (2024–25 +) |
|---|---|---|
| $0 – $18,200 | 0% | 0% |
| $18,201 – $45,000 | 19% | 16% |
| $45,001 – $120,000 | 32.5% | 30% (to $135k) |
| $120,001 – $135,000 | 37% | 30% |
| $135,001 – $190,000 | 37% | 37% |
| $190,001+ | 45% | 45% |
Rows highlighted green indicate a rate reduction. The $135,001–$190,000 bracket (37%) is unchanged.
Tax Savings by Income Level
The table below shows the approximate income tax saving (excluding Medicare Levy) at common salary levels, comparing the 2023–24 rates with the current 2025–26 rates.
| Annual Salary | Old Tax (2023–24) | New Tax (2025–26) | Annual Saving |
|---|---|---|---|
| $45,000 | $5,092 | $4,288 | $804 |
| $60,000 | $10,342 | $8,788 | $1,554 |
| $80,000 | $18,067 | $15,788 | $2,279 |
| $100,000 | $24,632 | $22,788 | $1,844 |
| $120,000 | $31,132 | $29,788 | $1,344 |
| $150,000 | $43,132 | $40,288 | $2,844 |
Income tax only. Excludes Medicare Levy (2%), LITO offset, and HECS/HELP. Figures are approximate.
Who Benefits Most?
Low-income earners ($18,201 – $45,000): This group benefits from the reduction of the second bracket from 19% to 16%. The maximum saving for someone earning $45,000 is around $804 per year — or about $15 per week extra in take-home pay.
Middle-income earners ($45,001 – $135,000): This is the group that benefits most in dollar terms. They gain from the lower 16% rate on earnings up to $45,000 and from the lower 30% rate on earnings from $45,001 to $135,000. A person earning $80,000 saves approximately $2,279 per year.
High-income earners ($135,001+): These earners also benefit from the lower rates on the first $135,000 of their income. The 37% and 45% brackets are unchanged. Someone earning $200,000 saves the same as someone earning $135,000 in absolute terms (~$3,729/year), since they pay the same lower rates on the first $135,000.
Calculate Your Exact Take-Home Pay
Use our free salary calculator to see your exact take-home pay under the current 2025–26 rates, including Medicare Levy, LITO, and optional HECS/HELP.
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