By Rachel Clun
Prime Minister Anthony Albanese has unveiled a major overhaul of the stage 3 tax cuts, promising cuts for all 13.6 million working Australians to help with cost-of-living pressures.
“Australians deserve more help, and today I can confirm that more help is on the way,” he said in a speech on Thursday. “Everyone who works and pays tax will benefit.”
All Australian taxpayers will receive a tax cut on July 1.Credit: Marija Ercegovac
So what exactly does that help look like, and who will benefit the most on July 1 when the changes come into effect?
OK, what are the changes?
The lowest tax rate, for earnings under $45,000 a year, will be reduced from 19 to 16 per cent.
The 30 per cent rate will apply to incomes between $45,001 and $135,000, cutting out earlier than under the original stage 3 plan.
The 37 per cent tax rate, which was originally going to be scrapped, will instead remain for earnings between $135,001 and $190,000, and the top 45 per cent tax rate will kick in for earnings over $190,000 – below the originally planned $200,000 threshold, but above the current $180,000 level.
Who will get a bigger tax cut?
The point of the changes is to shift more of the benefit in tax cuts to lower-income earners from those on higher wages.
Under the revised plan, people earning less than $45,000 will now get a tax cut of up to $804 a year. In the original stage 3 plan, they would not get any relief.
It’s worth noting that low-income workers received additional relief under stage 2 of the tax cuts, when the permanent low-income tax offset was lifted from $455 to a maximum of $700 a year for workers earning up to $66,000.
The retention of the 37 per cent tax rate means people who earn more than $146,486 will receive less than if stage 3 remained the same. The biggest reduction will be for people who earn more than $200,000, with their tax cut falling from almost $9100 to $4529.
How your job will be affected by the new stage 3 cuts
The changes benefit low and middle-income earners the most, which the federal government points out has big implications for many essential workers.
Looking at the share of workers who will now get a larger tax cut following the redesign, up the top with nearly 100 per cent are nursing support and personal care workers, primary school teachers, aged and disability carers and childcare workers.
Analysis from Treasury noted that compared with the original stage 3 design, the new plan would give larger cuts to more than 90 per cent of workers in highly in-demand occupations.
And how will the cuts affect workforce participation
Many of the jobs with the greatest share of workers getting additional tax benefits have another thing in common: the majority of those workforces are female.
The Treasury analysis said that in particular the change would boost the number of hours worked by women, who are more likely to work part-time than men, and are more responsive to changes in after-tax earnings than men in terms of the amount they will work.
Treasury estimates the redesign will produce a larger increase in hours worked than under the original stage 3 plan, driven by women earning between $20,000 and $75,000.
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