Although already legislated in revised form, the Stage 3 Tax Cuts remain one of the key pillars of the Government’s Cost of Living Relief package, delivering a tax cut to 13.6 million taxpayers. The current and new resident tax rates are as follows:
Personal tax rates
The Stage 3 tax cuts have now been redesigned and legislated to provide the same overall reduction in personal tax, but relief is now spread across all taxpayers.
Current resident tax rates for the financial year 1 July 2023 to 30 June 2024 are:
| 2023-24 | |
| Rate | Threshold |
| 0% | $0 – $18,200 |
| 19% | $18,201 – $45,000 |
| 32.5% | $45,001 – $120,000 |
| 37% | $120,001 – $180,000 |
| 45% | $180,001+ |
Medicare is an additional 2% where applicable
Recently legislated resident tax rates from 1 July 2024 will be:
| Rate | Threshold |
| 0% | $0 – $18,200 |
| 16% | $18,201 – $45,000 |
| 30% | $45,001 – $135,000 |
| 37% | $135,001 – $190,000 |
| 45% | $190,001+ |
Medicare is an additional 2% where applicable
Medicare Levy low-income threshold increase
As part of the cost of living relief, Medicare low-income thresholds are increased so low-income individuals continue to be exempt from paying the Medicare Levy.
- The threshold for singles will be increased from $24,276 to $26,000.
- The family threshold will be increased from $40,939 to $43,846.
- For single seniors and pensioners, the threshold will be increased from $38,365 to $41,089.
- The family threshold for seniors and pensioners will be increased from $53,406 to $57,198.
- For each dependent child or student, the family income thresholds will increase by a further $4,027 instead of the previous amount of $3,760.
HECS/HELP study debt indexation changes
The Government had already announced changes to the indexation of study debts, stating that 3 million people would benefit and that $3 billion in outstanding loan debts would be eliminated by the retrospective application of the new indexation rate.
The new indexation rate is to be applied as the lower of either the CPI (Consumer Price Index) or the WPI (Wage Price Index). For 2022-23 the WPI was lower than CPI, so the indexation applied on 1 June 2023 will be retrospectively adjusted from 7.1% down to 3.2%. At the time of writing the data is not available for the 1 June 2024 indexation amount.
The implications of the 2023 adjustment down from 7.1% to 3.2% are:
- If your HELP debt is still in place, you will have part of that debt wiped out based on this adjustment.
- If you have since paid off your HELP debt in full, you will be entitled to a refund for the adjustment amount. The delivery of this refund has not yet been announced.
- If you paid off your HELP debt in full prior to 1 June 2023 in anticipation of the 7.1% indexation, then you will receive no refund as the retrospective adjustment applies to a balance of $0 on 1 June 2023.
ATO funding and compliance program extension
The Government will extend the ATO Personal Income Tax Compliance Program for one extra year from 1 July 2027.
This extension will enable the ATO to continue to deliver a combination of 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.
SUPERANNUATION
The Government once again honoured their pre-election promise to make no changes to the superannuation system during their first term. Aside from indirect references around compliance programs, there is one significant superannuation related measure in the Budget, as well as a reminder of another key measure from last year below.
Superannuation – Paid Parental Leave (PPL)
Funding to strengthen the PPL scheme and improve women’s retirement outcomes includes:
- $1.1 billion over four years from 2024–25 (and $0.6 billion per year ongoing) to pay superannuation on Commonwealth government-funded PPL for births and adoptions on or after 1 July 2025. Eligible parents will receive an additional payment based on the Superannuation Guarantee (12% of their PPL payments), as a contribution to their superannuation fund by the Government.
- $10 million over two years from 2024–25 to provide additional support for small business employers in administering PPL.
- $1.4 million over two years from 2023–24 to update communication products and documents for potential PPL recipients.
$3 million superannuation balances
Despite no changes in their first term, the previously announced Division 296 tax for people with over $3 million in total superannuation apply from 1 July 2025 is now before Parliament in draft legislation form. The Government has performed consultation and although it will not apply until 1 July 2025, there is an intention to legislate the measures as previously announced now.
A reminder that the key features of the proposal are:
- It applies to the total superannuation held by an individual, regardless of how many funds they have an account in.
- It applies a 15% tax to unrealised gains in asset values.
- It applies to the increase in value for balances over $3 million on 30 June 2026. So unrealised gains to 30 June 2025 are effectively grandfathered and not subject to this tax. The increase accounts for contributions and withdrawals to arrive at an earnings amount.
- The tax is assessed to the member, so they will have the choice of paying the amount personally or electing to have the tax paid by their superannuation fund.
For more information on the May 2024 Federal Budget please click here for our overview.