From 1 July 2024, the Australian Government is set to implement significant changes to personal income tax rates and thresholds which will effect virtually all Australian taxpayers. These adjustments, which form part of the broader federal budget efforts, aim to alleviate cost of living pressures.

The upcoming changes are reductions in key tax rates and increases in income thresholds. Specifically, the 19 per cent tax rate will drop to 16 per cent, and the 32.5 per cent rate will decrease to 30 per cent. Additionally, the income thresholds for the 37 per cent and 45 per cent tax rates will see upward revisions, enabling more taxpayers to retain a greater portion of their earnings. This legislative move by the Australian Government ensures the benefits of these tax cuts will reach approximately 13.6 million Australian taxpayers, effectively putting more money back into the pockets of individuals across the nation.

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When to expect the benefits of the new tax rates

Your upcoming tax cut will take effect starting 1 July 2024, aligning with the new changes in the personal income tax rates and thresholds. From that date, you will notice that less tax is being deducted from your regular pay, allowing you to retain more of your income.

However, some individuals will receive the benefits of these tax cuts differently. Depending on your tax sitution, you might see this adjustment reflected only after you lodge your tax return for the 2024-2025 financial year.

For those looking to understand exactly how these changes might impact their finances, the Australian Government provides a tax cut calculator. This tool can help you estimate the amount you will save annually due to the revised tax rates and thresholds.

Comparing tax rates and thresholds for 2023-24 and 2024-25

The upcoming financial year of 2024-2025 will introduce new individual tax rates and thresholds. The table below provides a comparison between the existing tax rates and thresholds for the 2023-24 financial year and the updated figures for 2024-25. These changes are designed to reduce the tax burden on Australian taxpayers and adjust the points at which different tax rates apply.

How the new tax rates and thresholds will work from July 2024

Understanding how individual income tax rates and income thresholds work is essential for managing your finances effectively. Starting from 1 July 2024, new tax rates and thresholds will be implemented, affecting how much tax you pay.

Everyone has a tax-free threshold of $18,200, meaning you can earn up to this amount each year without paying any income tax.

Here's how the new tax structure works:

• If your annual income is between $18,201 and $45,000, the first $18,200 is tax-free. For the remaining amount up to $45,000, you'll pay a 16 per cent tax rate.
• For earnings between $45,001 and $135,000, you continue to enjoy the tax-free threshold on the first $18,200. You pay 16 per cent on income up to $45,000, and 30 per cent on the portion of income between $45,001 and $135,000.
• If your income ranges from $135,001 to $190,000, the first $18,200 remains tax-free. Income up to $45,000 is taxed at 16 per cent, income between $45,001 and $135,000 at 30 per cent, and income between $135,001 and $190,000 at 37 per cent.
• For those earning over $190,000, the tax rates continue as follows: 16 per cent on income up to $45,000, 30 per cent on income between $45,001 and $135,000, and 37 per cent on income between $135,001 and $190,000. Any income over $190,000 is taxed at 45 per cent.

Additionally, certain groups such as low-income earners and seniors may qualify for tax offsets, which can further reduce the amount of tax payable.

Next Step

Contact Causbrooks today to schedule your complementary consultation and make the most of the forthcoming tax adjustments.