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Australia’s newest tax cuts – October 2022

The stage-three tax cuts are the third phase of Morrison’s Government’s legislated tax plan that will come into effect in July 2024. Whilst passed in 2019 with Labor’s support, Anthony Albanese has gone into the 2022 election, promising no changes.


Since then, the Albanese government has left open the prospect of amending the tax cuts with Chalmers pointing out that global economic conditions have changed and Australia’s outlook has shifted; with inflation rising, higher government debt and a very uncertain future. As a revision of the tax cuts: Stage One was a low- and middle-income tax offset worth up to $1,080; Stage Two raised the 32.5% marginal tax bracket from $37,000 - $90,000 to $45,000 -$120,000; Stage Three abolishes the 37% marginal tax bracket completely and lowers the 32.5% to 30% meaning that the 30% marginal tax rate applies to the $45,000 to $200,000 income bracket.


These changes were introduced when the Coalition wished to stimulate the economy through tax cuts, whilst also addressing ‘bracket creep’ – a concept that describes how increasing nominal wages creates greater tax burden as tax brackets are not adjusted for inflation. Despite being a structural issue for Australia, bracket creep was never properly addressed due to its ability to help close fiscal gaps to improve the budget line. The stage-three tax cuts are estimated to cost the budget $243bn in lost tax revenue over the decade after they are introduced.


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