With the cost of living increasing worldwide, the Australian Government has taken a major step to ease the financial burden on its people. Since the new tax cuts implemented on July 1, 2024, all Australian taxpayers have been able to enjoy lower tax rates and higher thresholds. This bold move puts Australia in a strong position, especially when compared to its peers, such as the United Kingdom, where income tax rates remain higher and more rigid.
In this blog, we will discuss the recent changes to the income tax rates in Australia and explain why this tax relief benefits taxpayers and makes Australia a better place to live.
Recent Income Tax Cuts in Australia
Since July 1, 2024, the Australian Government has made significant changes to individual income tax rates, benefiting 13.6 million Australian taxpayers.
These changes include:
- Reduction of the 19% tax rate to 16%
- Reduction of the 32.5% tax rate to 30%
- Increase in the 37% tax threshold from $120,000 to $135,000
- Increase in the 45% tax threshold from $180,000 to $190,000
These tax cuts are reflected in every individual’s take-home pay, providing an immediate boost to Australian workers and professionals.
The Impact on Take-Home Pay
For many Australians, these cuts translate into more money in their wallets with every paycheck. Employers will need to adjust Pay As You Go (PAYG) withholding tax from July 2024, ensuring that the tax relief is passed on to employees through increased take-home pay. Those who file their tax returns at the end of the financial year will see the savings reflected in their refunds, which will also be beneficial.
A User-Friendly Tax System
The Australian tax reforms are particularly beneficial for low and middle-income earners. Here’s how it works:
- The first $18,200 of income is not taxable, meaning Australians pay no tax on the first $18,200 they earn.
- For income earners in the range of $18,201 to $45,000, the new tax rate is 16%, down from the previous 19%.
- For the income range of $45,001 to $135,000, the rate is 30%, reduced from 32.5%.
This progressive tax system aims to lessen the tax burden across different income levels for the benefit of all.
How Australia’s Tax Cuts Boost Cost-of-Living Support
The Australian government recognises that many families are struggling financially due to the rising cost of living, and these tax reductions are designed to address this issue. This way, individuals and families can better manage their expenses as the government decreases the amount of tax Australians have to pay.
To make it easier to understand the difference, let’s compare the income tax rates for the financial year 2024-25 with the financial year 2023-24.
| Income Range (AUD) | 2023–24 Tax Rate (%) | 2024–25 Tax Rate (%) |
| $0 – $18,200 | 0 | 0 |
| $18,201 – $45,000 | 19 | 16 |
| $45,001 – $135,000 | 32.5 | 30 |
| $135,001 – $190,000 | 37 | 37 |
| $190,001 and above | 45 | 45 |
Source: https://taxcuts.gov.au/
Conclusion
The new income tax cuts in Australia are a game changer for the country’s citizens. The Australian Government has provided practical and concrete assistance to taxpayers struggling with cost of living pressures by cutting taxes and raising thresholds. It can be said that the Australian tax system has become more beneficial, particularly for middle and higher-income earners.
For those considering relocation or planning their lives in Australia, these tax changes add to the reasons why Australia is a great place to live, work, and do business.
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