Heading into the 2022-23 Federal Budget on 25 October, the question for the Australian Government is different. It is not whether to introduce personal income tax cuts but whether to keep, amend or repeal the cuts legislated to commence on 1 July 2024.
In Australia, the 2018-19 Budget introduced the Personal Income Tax Plan. The plan implemented three stages of income tax cuts over seven years that will, by 2024-25, simplify the tax brackets and enable taxpayers to earn up to $200,000 before paying a new top marginal tax rate of 45%. Stages of the plan, bringing relief for low and middle income earners, were brought forward in the 2019-20 Budget and again in 2020-21.
Labor’s pre-election Lower Taxes policy states, “An Albanese Labor Government will deliver tax relief for more than 9 million Australians through the legislated tax cuts that benefit everyone with incomes above $45,000.” But this month, the Treasurer has subtly changed the narrative from simply “our policy has not changed on stage three tax cuts” to “We do need to ensure that spending in the Budget, particularly in these uncertain global times, is geared toward what’s affordable and sustainable and responsible and sufficiently targeted.”
The 1 July 2024 tax cuts
Stage three of the Personal Income Tax Plan is legislated to take effect from 1 July 2024.
| Tax thresholds: Australian resident taxpayers | ||
| Tax rate | 2022-23 | From 1 July 2024 |
| 0% | $0 – $18,200 | $0 – $18,200 |
| 19% | $18,201 – $45,000 | $18,201 – $45,000 |
| 30% | $45,001 – $200,000 | |
| 32.5% | $45,001 – $120,000 | |
| 37% | $120,001 – $180,000 | |
| 45% | >$180,000 | >$200,000 |
Where to from here?
The second 2022-23 Federal Budget will be announced on 25 October 2022. If the Government make no mention of the stage three tax cuts, they have another opportunity to refine their position in the 2023-24 Federal Budget released in May 2023, more than a year before the 1 July 2024 tax cuts come into effect.
Our best guess? The Government will announce a review of the stage three tax cuts, then open the issue to consultation, locking in the position, whatever it is, in the 2023-24 Federal Budget.
We’ll keep you posted!
