No announcement to change legislated ‘stage 3’ tax cuts
From 1 July 2024
The former government legislated three stages of personal income tax cuts commencing from the 2018-19 financial year, with stage 3 of these tax cuts due to take effect on 1 July 2024. While the current government had previously ruled out any changes in this area, there has been ongoing speculation about whether it would be delayed, modified or cancelled given it comes at significant cost to the Budget and particularly benefits higher income earners.
With nothing new announced in last night’s Budget regarding the stage 3 tax cuts, they remain legislated to take effect on 1 July 2024. However, it’s worth noting that there is more than a year, and a further Federal Budget, between now and commencement.
As a reminder, the stage 3 tax cuts will change the income tax rates and thresholds (for resident taxpayers) as follows:
Current (2022–23) year and 2023-24 year
Taxable income Marginal tax rate*
$18,200 to $45,000 19%
$45,001 to $120,000 32.5%
$120,001 to $180,000 37%
$180,001 and over 45%
*Excluding Medicare levy
From 2024-25 year
Taxable income Marginal tax rate*
$18,200 to $45,000 19%
$45,001 to $200,000 30%
$200,001 and over 45%
*Excluding Medicare levy
No extension of LMITO
Ceased from 2022–23 financial year
The low and middle income tax offset (LMITO) was a temporary tax offset available from the 2018–19 to 2021–22 financial years. For its final year, a non-refundable offset of up to $1,500 was available to clients with taxable income below $126,000, with the maximum offset applying where taxable income was between $48,000 and $90,000.
The government made no announcement in the Budget about extending LMITO, and it is therefore legislated to no longer apply in this financial year or future years.
Exempting lump sum payments in arrears from the Medicare levy
From 1 July 2024
A lump sum in arrears payment representing income accrued in previous financial years is taxable in the year that a person receives the payment and in that year can have higher taxable income that’s subject to Medicare Levy.
The government has announced it will exempt eligible lump sum payments in arrears from the Medicare levy from 1 July 2024.
This measure will ensure low-income taxpayers do not pay higher amounts of the Medicare levy as a result of receiving an eligible lump sum payment, for example as compensation for underpaid wages.
Eligibility requirements will ensure that relief is available to people who are genuinely low-income and should be eligible for a reduced Medicare levy. To qualify, a person must be eligible for a reduction in the Medicare levy in the 2 most recent years to which the lump sum accrues. People must also satisfy the existing eligibility requirements of the existing lump sum payment in arrears tax offset which can reduce their tax liability in the year of receiving this payment.
Increasing the Medicare levy low-income thresholds
From 1 July 2022
The government will increase the Medicare levy low-income thresholds for singles, families, seniors and pensioners from the 2022-23 income year. This is a routine increase and applies retrospectively from the beginning of the financial year.
The increase in thresholds provides cost of living relief by taking account of recent CPI outcomes so that low-income individuals continue to be exempt from paying the Medicare levy.
The following table compares the level of taxable income below which no Medicare Levy is payable.
Income Category 2021-22
Taxpayers entitled to seniors and pensioners tax offset (SAPTO)
Individual $36,925
Married or sole parent $51,401
For each dependent child or student, add $3,619
All other taxpayers
Individual $23,365
Couple / sole parent (family income) $39,402
Income Category 2022-23
Taxpayers entitled to seniors and pensioners tax offset (SAPTO)
Individual $38,365
Married or sole parent $53,406
For each dependent child or student, add $3,760
All other taxpayers
Individual $24,276
Couple / sole parent (family income) $40,939
Amendment to the Electric Car Discount
From 1 April 2025
On 12 December 2022, the Treasury Laws Amendment (Electric Car Discount) Bill 2022 was enacted to provide an FBT exemption in respect of eligible electric vehicles. As originally legislated, the eligibility of plug-in hybrid electric cars from the fringe benefits tax exemption will cease for these vehicles where they are provided on or after 1 April 2025.
Arrangements involving plug-in hybrid electric cars entered into between 1 July 2022 and 31 March 2025 remain eligible for the Electric Car Discount.
The FBT exemption will continue to apply to battery electric vehicles and hydrogen fuel cell electric vehicles
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Disclaimer and Warning
The information above is of a general nature only. It should not be used as a source to make financial decisions. It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.
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