ATO Changes: How Much Extra Money Will You See In Your Pay After July 1?

ATO Changes: How Much Extra Money Will You See In Your Pay After July 1?

Everyone has tax rates on the brain right now, and when the 2024-25 federal budget was handed down, there was increased interest placed on the ways in which everyday Aussies can save. One point of interest, in particular, has been the stage three tax cuts set to land in July 2024.

If you’re wondering how these tax cuts are set to work, here’s a quick and simple guide.

Stage three tax cuts are coming: here’s the deal

If you’ve been hearing a lot of talk about ‘stage three tax cuts’ of late, but aren’t exactly sure what they entail, allow us to offer an explanation. There have been changes to the original plan, which will affect all Aussies and their pay packets.

What did the old stage three tax cuts look like?

Originally, when the Coalition was in power, the tax cuts were set to abolish the current 37 per cent tax bracket and shift other tax brackets around, mostly benefiting high-income earners.

Abolishing the 37 per cent bracket entirely would mean that a huge sector of people on salaries between $45,000 and $200,000 would receive minimal tax relief, but those on salaries over $200,000 would see a huge bump. You can see what the previous proposal was in this table from H&R Block below:

Old stage three tax cuts (Image: H&R Block)

How have the tax cuts changed?

When the Albanese government came into power, it challenged these proposed tax changes and opted to shift them to more evenly assist those in low and middle-income earning brackets, as a result of the challenging economic times we find ourselves in.

Under the new legislation, income earners over $200,000 only receive $4,529 instead of the $9,075 they were set to receive under the old model. Income earners of between $30,000-$50,000 are also set to receive an additional tax break under the new legislation where they would have received nothing before.

Under the new legislation, this is how the rates are changing, and for who:

Image: Australian Treasury

It’s worth noting here, as the ABC has done, that these tax rates do not necessarily mean folks in the highest bracket will be paying $0.45 on every dollar they earn.

The way it works is your earnings are broken down and taxed according to the different rates, but only the money you earn over each bracket is taxed at that specific rate.

For example: Per the ATO, under the 2022/23 rates, anyone earning between $18,201 – $45,000 would be taxed 19 per cent or $0.19 on every dollar for any income earned over $18,200. This continues for every tax bracket that follows. You can see the full breakdown via the ATO here.

How much extra money will you take home after July 1?

As we get closer to the implementation of the new stage three tax cuts, there’s been a lot of talk about how much extra we’ll all be taking home after July 1.

A full list of calculations revealing how much each pay bracket will be taking home has been provided by the Australian Treasury and can be found here. We’ve pulled a few of these examples for you to see below:

Taxable Income ($)Tax cut ($)Extra pay per fortnight (approx)

For taxpayers to take advantage of these new stage three tax cuts, you don’t have to do anything come July 1. Your employer will automatically reduce the amount of tax withheld, and you’ll start seeing a slight bump in the money you receive in your pay packet.

Want more tax advice ahead of the EOFY? Check out all our biggest tips here.

This article has been updated with additional information.

Lead Image Credit: ATO/Paramount

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