Directed at easing cost of living pressures, the 2024-25 Budget has introduced tax cuts for all 13.6 million Australian taxpayers from 1 July 2024. In addition, the Government has also announced an increase to the Medicare levy low-income thresholds for singles, families, seniors and pensioners from 1 July 2023, and extended the ATO Personal Income Tax Compliance Program.
Revised stage 3 tax cuts commence from 1 July 2024
- The Government's revised Stage 3 tax changes, announced on 25 January 2024 and enacted into law by the Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024 will commence from 1 July 2024.
- The tax cuts are aimed at providing cost of living relief, returning bracket creep and reducing disincentives to take on more hours of work.
- The following tax cuts will apply from 1 July 2024:
- the 19% rate will be reduced to 16%;
- the 32.5% tax rate will be reduced to 30%;
- the income threshold above which the 37% rate applies will be increased from $120,000 to $135,000; and
- the income threshold above which the 45% tax rate applies will be increased from $180,000 to $190,000.
- This measure is estimated to decrease receipts by $1.3 billion over the 5 years from 2023–24.
Increased Medicare levy low income thresholds
- The Medicare levy low-income thresholds for 2023–24 have been increased, with the aim of ensuring more than one million low-income taxpayers continue to be exempt from the Medicare levy or pay a reduced levy rate.
- The Medicare levy low-income thresholds for singles, families, seniors and pensioners will increase from 1 July 2023 as follows:
- the threshold for singles has been increased from $24,276 to $26,000;
- the family threshold has been increased from $40,939 to $43,846;
- the threshold for single seniors and pensioners has been increased from $38,365 to $41,089;
- the family threshold for seniors and pensioners has been increased from $53,406 to $57,198; and
- the family income thresholds will now increase by $4,027 for each dependent child, up from $3,760.
- The increase to the thresholds accounts for recent annual CPI outcomes and is estimated to decrease receipts by $640 million over the four years to 2026–27.
Personal income Tax Compliance Program extended
- The ATO Personal Income Tax Compliance Program will be extended for one year from 1 July 2027.
- The program is aimed at assisting the ATO to deliver proactive, preventative and corrective activities in key areas of non-compliance, including overclaiming of deductions, incorrect reporting of income and inappropriate tax agent influence. This will enable the ATO to continue its focus on emerging risks to the tax system, such as deductions relating to short-term rental properties.
- This measure is estimated to increase receipts by $180.3 million and increase payments by $44.3 million over the 5 years from 2023-24.
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