Stage 3 Tax Cuts Explained: How They Affect Your Take-Home Pay in 2025
The Stage 3 tax cuts restructured Australia's income tax brackets from 1 July 2024. Find out exactly how much more (or less) you take home at every income level, with worked examples.
From 1 July 2024, Australia's income tax brackets were restructured under the Stage 3 tax cuts. The changes — originally legislated in 2019 but modified by the Albanese government in early 2024 — delivered tax relief across a broad range of incomes while redirecting more of the benefit toward middle-income earners.
Here's exactly what changed, who benefits, and how to calculate your new take-home pay.
What are the Stage 3 tax cuts?
The Stage 3 tax cuts are the third tranche of the legislated personal income tax changes that began with the 2018–19 federal budget. The original Stage 3 proposal was modified in January 2024 to reduce the benefit for very high earners and extend relief to middle incomes.
Old rates vs. new rates: what changed
The key change was in the middle of the income distribution. Here's a direct comparison:
| Bracket | Old rate (to June 2024) | New rate (from July 2024) | Change |
|---|---|---|---|
| $0 – $18,200 | 0% | 0% | — |
| $18,201 – $37,000 | 19% | Combined into 16% bracket to $45,000 | |
| $37,001 – $45,000 | 32.5% | 16% | −16.5 pp |
| $45,001 – $120,000 | 32.5% | 30% | −2.5 pp |
| $120,001 – $135,000 | 37% | 30% | −7 pp |
| $135,001 – $180,000 | 37% | 37% | — |
| $180,001 – $190,000 | 45% | 37% | −8 pp |
| Over $190,000 | 45% | 45% | — |
The 37% bracket threshold was also moved from $120,000 to $135,000 — meaning a bigger slice of income sits in the 30% bucket. And the 45% threshold dropped from $180,000 back to $190,000.
How much more do you take home? Real examples
Here's the annual tax saving at key income levels (comparing old Stage 2 rates to the new Stage 3 rates, after LITO, before Medicare Levy):
| Annual income | Old tax (FY23–24) | New tax (FY24–25+) | Annual saving | Extra per week |
|---|---|---|---|---|
| $40,000 | $4,462 | $2,242 | $2,220 | $43 |
| $60,000 | $11,967 | $8,592 | $3,375 | $65 |
| $80,000 | $18,467 | $14,288 | $4,179 | $80 |
| $100,000 | $24,967 | $20,788 | $4,179 | $80 |
| $120,000 | $31,867 | $27,088 | $4,779 | $92 |
| $150,000 | $43,567 | $38,188 | $5,379 | $103 |
| $200,000 | $60,667 | $60,688 | ~$0 | — |
Key insight: The bulk of the benefit sits between $40,000 and $150,000. Above $190,000, the saving is negligible — and the original Stage 3 design that would have delivered larger cuts to the highest earners was specifically scaled back in the 2024 revision.
The Low Income Tax Offset (LITO) still applies
The LITO was not changed by the Stage 3 cuts. It provides up to $700 in tax relief for incomes up to $37,500, phasing out to zero by $66,667. This means people earning under $37,500 receive an additional boost on top of the lower 16% bracket rate.
For an income of $30,000: income tax = $30,000 × 16% − $18,200 × 16% + 0 = actually the tax on $30,000 is ($30,000 − $18,200) × 16% = $1,888, and after LITO of $700 the net tax is $1,188. That is a significantly lower tax bill than under the old rates.
Medicare Levy is not included
The figures above are income tax only. The Medicare Levy (2%) is additional and applies separately. At $80,000, Medicare Levy = $1,600. So actual total deductions are income tax + Medicare Levy.
Want to check your exact numbers? The Dolaro Income Tax Calculator uses the current Stage 3 rates with LITO and Medicare Levy applied automatically.
What about HECS-HELP repayments?
HECS-HELP repayments are calculated on your repayment income (separately from income tax) and are withheld by your employer. They were not changed by the Stage 3 cuts. If you have a HECS debt, subtract your annual compulsory repayment from your new take-home pay to get your true net income.
Use our HECS/HELP Repayment Calculator to see your exact repayment amount and estimated payoff year.
How to check your new withholding
Your employer should have updated their payroll to reflect the new rates from 1 July 2024. If you noticed a change in your fortnightly or weekly pay from that date, this is why. If you want to verify, you can:
- Use the Income Tax Calculator to see what your annual tax should be
- Divide by 26 (fortnightly) or 52 (weekly) to get the expected withholding per period
- Compare to your pay slip
Frequently asked questions
When did the Stage 3 tax cuts start?
The Stage 3 tax cuts took effect from 1 July 2024 — the start of the FY 2024–25 financial year. They are now the current rates for FY 2025–26 as well.
Who benefits most from the Stage 3 tax cuts?
Middle-income earners in the $45,000–$135,000 range benefit most. The reduction of the 32.5% bracket to 30%, and the widening of the 19%/16% bracket, delivered the largest dollar savings for incomes in the $80,000–$135,000 range.
Do the Stage 3 tax cuts affect Medicare Levy?
No — Medicare Levy (2% of taxable income) was not changed by the Stage 3 tax cuts. It remains at 2% with the same low-income shade-in threshold.
Are the Stage 3 tax cuts permanent?
Yes — the Stage 3 rates are legislated as the permanent income tax schedule. They are not a temporary measure, though future governments could choose to amend the brackets.
Figures in this article are based on ATO published tax rates for FY 2024–25 and FY 2025–26. Individual circumstances vary — this article is for general information only and does not constitute tax advice. Consult a registered tax agent for personal advice.