Unlike other tax breaks, however, these won’t hit your bank account all at once after you’ve filed your tax return. Instead, you’ll start taking advantage the moment you get your first paycheck in July.
Here’s how they’ll work and how much you’ll benefit.
How will I get my Stage 3 tax reduction?
There is a bit of a misconception that the Stage 3 tax cuts will give people a bigger tax return at the end of each financial year.
While that’s how the recently ended low- and middle-income tax offset worked, the Stage 3 cuts are completely different.
By changing Australia’s tax brackets, they reduce how much tax everyone pays on their income.
For the vast majority of taxpayers, this means that instead of receiving a big, juicy tax return once a year, you’ll lose less of your income to the taxman and be able to take home more of your paycheck every week, fortnight or month.
It’s basically a pay raise you shouldn’t have asked for.
How much tax reduction will I get?
The government says the average tax cut will be $1,888 a year – about $36 a week – but the exact amount will vary from person to person, depending on how much you earn.
Someone who earns $18,000 won’t get a cut because no one pays tax on the first $18,200 they earn.
People on the minimum wage, which for 52 weeks of work will be $47,626 from July 1, will see a cut of $870 over the year, or just under $16.70 a week.
The cuts become more significant the higher one’s salary is.
Someone earning $100,000 would have an extra $42 to spend or save each week, while anyone with $190,000 would receive $87 each week, or $4,529 per year.
It’s worth noting that these are just estimates based on federal government data – your exact tax cut may be different due to tax offsets, the Medicare levy and other financial circumstances.
The information provided on this website is of a general nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal goals, financial situation or needs. Before acting on any information on this website, you should consider the suitability of the information for your goals, financial situation and needs.
