What are the Stage 3 tax cuts?
The Stage 3 tax cuts were introduced by Malcolm Turnbull and Scott Morrison. As hinted in the name, this is the final of three stages of cutting taxes.
Stages 1 and 2 have already been implemented.
Stage 1 of the tax cuts introduced the temporary low- and middle-income tax offset, which ended in June 2022.
Stage 2, which kicked in from 2020-21, increased the existing low-income tax offset – a tax refund for those earning up to $66,000.
Labor promised to keep the Stage 3 tax cuts before the 2022 election and voted to legislate the tax cuts in 2019 when it was in Opposition.
The original Stage 3 tax cuts meant everyone earning above $45,000 would receive a tax cut - meaning more money in their bank account from the second half of this year. Higher-income earners would benefit the most. It would not have reduced taxes for anyone earning below $45,000.
What are the changes?
But now the government is proposing to change the Stage 3 tax cuts in two main ways. First, the changes would lower the tax rate at the bottom end so workers earning less than average incomes pay less. Second, a higher tax rate would apply to workers earning more than $135,000, so they pay more. The changes mostly impact Australians who earn $45,000 or less, and those who earn more than $135,000.
The Prime Minister has said this change is necessary to help people manage the cost-of-living crisis.
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