Proposed Changes to Stage 3 Tax Cuts Announced
CoggerGurry • February 16, 2024
It’s been hard to miss news of the Government’s broken promise on stage 3 tax cuts, legislated to take effect from 1 July 2024. Cost of living pressure has driven the change to redistribute the savings to direct more into the hands of low- and middle-income earners.
For those earning approximately between $40,000 and $145,000 you will be better off under the proposed cuts. An average income earner of $80,000 would receive $1,679 in savings versus the already legislated cuts of $875. The impact on high income earners is more pronounced with earnings above $200,000 will have their tax saving almost halved from $9,075 to $4,529.
If you are concerned about the impact on your position or want to know more contact us a CoggerGurry today.
| What was originally legislated from 1 July 2024 | ||
|---|---|---|
| Taxable Income | Marginal Tax Rate | Tax Amount |
| 0 to $18,200 | Nil | Nil |
| > $18,201 to $45,000 | 19% | 19c for each $1 over $18,200 |
| > $45,001 to $120,000 | 32.50% | $5,092 plus 325c for each $1 over $45,000 |
| > $120,001 to $180,000 | 37% | $29,467 plus 37c for each $1 over $120,000 |
| $180,001 and above | 45% | $51,667 plus 45c for each $1 over $180,000 |
| New Updated Propose Stage 3 Tax Cuts | ||
|---|---|---|
| Taxable Income | Marginal Tax Rate | Tax Amount |
| 0 to $18,200 | Nil | Nil |
| > $18,201 to $45,000 | 16% | 16c for each $1 over $18,200 |
| > $45,001 to $135,000 | 30% | $4,288 plus 30c for each $1 over $45,000 |
| > $135,001 to $190,000 | 37% | $31,288 plus 37c for each $1 over $135,000 |
| $190,001 and above | 45% | $51,638 plus 45c for each $1 over $190,000 |
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As part of its re-election commitment, the Federal Government has passed legislation to reduce all outstanding HECS-HELP debts by 20%. The Bill passed the Senate on 31 July 2025 and will come into effect once it receives Royal Assent. The reduction will be applied retrospectively to student loan balances held as at 1 June 2025. While many borrowers have recently seen their loan balances increase due to the 3.2% annual indexation, the Government has confirmed that the 20% discount will be calculated based on the loan amount before indexation was applied. How the Reduction Will Work: Once the legislation is in effect, the Australian Taxation Office (ATO) will automatically apply the 20% reduction to eligible student loan accounts. Indexation will also be recalculated using the reduced loan balance, delivering further relief for borrowers. This change builds on previous reforms that now link indexation to the lower of the Consumer Price Index (CPI) or Wage Price Index (WPI), rather than CPI alone, an approach designed to ease the financial pressure on graduates. Lodging Your Tax Return: If you’re getting ready to lodge your tax return, you don’t need to delay. The ATO will automatically apply the discount in the coming months. If you’ve fully repaid your student loan since 1 June 2025, you may be eligible for a refund equivalent to the 20% discount (subject to any other outstanding tax liabilities). Other Changes to Student Loan Repayments: The legislation also introduces changes to repayment thresholds. From 1 July 2025, the minimum income threshold for compulsory student loan repayments will increase from $54,435 to $67,000, making repayments more equitable. If you have any questions about how these changes may affect you or your tax return, please get in touch with CoggerGurry today, we’re here to help. Tel: 03 5571 0111
Parliament has resumed, and we are watching closely for the introduction of the Division 296 tax Bill to the lower house. While the Government is managing a number of priorities, the extra time provides us with the opportunity to continue planning with clients who may be affected and to ensure we are ready when the legislation is finalised. Although no update has been given on whether the 1 July 2025 start date will be deferred, we’ll keep you informed as soon as there is more clarity. In the meantime, rest assured that we are monitoring developments carefully and will provide guidance and advice as soon as the position becomes clearer.
