Economy & public financesAustralia

In forceIn force with the first rate at 15% for 2026-27; the More Cost of Living Relief Act 2025 already sets it at 14% from 2027-28.

Redesign of the « Stage 3 » income tax cuts (2024) and the 2026-2027 top-ups

The « Stage 3 » income tax cuts legislated in 2018 and 2019 under the Coalition were to apply, from 1 July 2024, a single 30% rate from A$45,000 to A$200,000. On 25 January 2024 the Albanese government announced a redesign, passed on 27 February 2024: from 1 July 2024 the 19% rate falls to 16%, the 32.5% rate to 30%, and the 37% and 45% thresholds rise to A$135,000 and A$190,000. A 2025 act lowers the first rate again, to 15% since 1 July 2026 and 14% from 1 July 2027.

Updated: November 5, 2026Next milestone: July 1, 2027 — First tax rate falls to 14%

At a glance

Reference text

Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024 (Act amending the Treasury laws — cost-of-living tax cuts)[1]

No. No. 3, 2024 · March 5, 2024

Read the text ↗

Carried by

  • Anthony Albanese[11]Prime Minister (Labor) — announcement of the redesign on 25 January 2024 · 2024 · Initiator
  • Jim Chalmers[14][16]Treasurer — introduced the 2024 bill and the 2025 bill (new cuts to 15% then 14%) · 2024-2025 · Initiator
  • Josh Frydenberg[20][3]Treasurer (Liberal-National Coalition) — 2019 act completing the original Stage 3 (single 30% rate from A$45,000 to A$200,000) · 2019 · Amendment

Implementation

Status

In force

since July 1, 2026[2][5]

In force with the first rate at 15% for 2026-27; the More Cost of Living Relief Act 2025 already sets it at 14% from 2027-28.

Stated objective

Give every taxpayer a tax cut, with a bigger cut for middle incomes than the original Stage 3, to help with the cost of living; return bracket creep; increase incentives to work and labour supply; do so without adding to inflation or burdening the budget.[11][14]

According to the government (Prime Minister’s release of 25 January 2024 and the Treasurer’s second reading speech of 6 February 2024)

  • Taxpayers receiving a tax cut from 1 July 2024

    13,600,000

    2024-25 · according to the government[11]

    2.9 million more than under the original Stage 3, according to the government.

  • Taxpayers getting a bigger cut than under the original Stage 3

    84%

    2024-25 · according to the government (11.5 million taxpayers)[11]

  • Increase in labour supply, hours per week

    930,000

    estimate for the 2024 redesign · according to the Treasurer, citing Treasury estimates[14]

    « More than double » the labour supply impact of the original plan, according to the Treasurer.

Main measures

  • From 1 July 2024, the 19% rate becomes 16% (income from A$18,201 to A$45,000; the first A$18,200 remains tax-free).[1][11][5]
  • The 32.5% rate becomes 30%, for income from A$45,001 to A$135,000.[1][11]
  • The 37% bracket, which the original Stage 3 abolished, is kept: its threshold rises from A$120,000 to A$135,000, and the 45% threshold from A$180,000 to A$190,000 (instead of A$200,000 under the original Stage 3).[1][3][11]
  • The tables for non-residents (30% up to A$135,000, 37% up to A$190,000, 45% above) and for working holiday makers (15% up to A$45,000, then the resident rates) are aligned on the new thresholds.[1]
  • Cost announced by the government: a net cost of A$1.3 billion over the forward estimates, for a total impact of A$107 billion over the same period; Medicare levy low-income thresholds raised by a companion bill.[11][6]
  • The More Cost of Living Relief Act 2025 lowers the first rate to 15% for 2026-27 and to 14% from 2027-28 (other rates and thresholds unchanged), and again raises the Medicare levy low-income thresholds.[2][7]

In data

Marginal income tax rate by income bracket: before Stage 3, original Stage 3, redesign[3][1][2][5]

Resident individuals, statutory rates by income year (1 July – 30 June)

Marginal income tax rate by income bracket: before Stage 3, original Stage 3, redesign — chart values
Taxable income (A$)2023-24 ratesOriginal Stage 3 (2019 act, planned from 2024-25)Redesign, 2024-25 and 2025-26From 2027-28 (2025 act)
18,201–45,000 (15% in 2026-27.)19%19%16%14%
45,001–120,00032.5%30%30%30%
120,001–135,00037%30%30%30%
135,001–180,00037%30%37%37%
180,001–190,00045%30%37%37%
190,001–200,00045%30%45%45%
Above 200,00045%45%45%45%

Scale starts at 0% · The first A$18,200 is tax-free in every case. Statutory rates only: the Medicare levy and tax offsets are not included.

Budget balance

-3.9% GDP

2025

General government net lending, % of GDP (OECD Economic Outlook).

OECDSee the card →

Key figures

First income tax rate in 2026-27

15%

2026-27 income year · Observed

Income Tax Rates Act 1986, Schedule 7 (compilation in force on 1 July 2026)[5][2]

19% before 1 July 2024, 16% in 2024-25 and 2025-26, 14% from 2027-28.

Taxpayers receiving the 2026 and 2027 cuts

14,000,000

2026-27 · Announced

according to the government (2025-26 Budget)[13]

Up to A$268 a year in 2026-27 and A$536 from 2027-28 compared with 2024-25 settings, according to the government.

Extra hours worked per week from the three legislated cuts

1,300,000

compared with 2023-24 settings · Estimate

Treasury estimate, 2026-27 Budget[21]

Timeline

  1. Senate committee recommends passing the original tax plan, Labor and Greens dissent[10]

    The Senate Economics Legislation Committee recommends passing the Personal Income Tax Plan bill; Labor senators and the Greens publish dissenting reports.

  2. Original Stage 3 enacted (Personal Income Tax Plan Act 2018)[4][9]

    From 2024-25: 19% up to A$41,000, 32.5% up to A$200,000, 45% above — the 37% bracket disappears.

  3. Stage 3 expanded after the 2019 election[3][8]

    Royal Assent to the Tax Relief So Working Australians Keep More Of Their Money Act 2019: from 2024-25, 19% up to A$45,000 and a single 30% rate from A$45,000 to A$200,000.

  4. Announced

    Redesign announced by the Prime Minister and the Treasurer[11]

  5. Under debate

    Bill introduced in the House of Representatives[6][14]

  6. Bill passed by the House of Representatives[6]

  7. Adopted

    Passed by the Senate, final passage by both Houses[6][12]

    Royal Assent on 5 March 2024 (Act No. 3, 2024).

  8. Royal Assent: Act No. 3, 2024[1][6]

  9. In force

    New rates apply from the 2024-25 income year[1][11]

    16% up to A$45,000, 30% up to A$135,000, 37% up to A$190,000, 45% above.

  10. 2025-26 Budget announces two further cuts to the first rate[13]

    16% to 15% from 1 July 2026, then 14% from 1 July 2027; announced cost of A$17.1 billion over the forward estimates.

  11. More Cost of Living Relief bill passed by both Houses the day it was introduced[7][19]

    In the House, the second reading is agreed 91 votes to 52, with the Liberal-National opposition voting against.

  12. Royal Assent: Act No. 28, 2025[2][7]

  13. In force

    First rate lowered to 15% (2025 act)[2][5]

    In force with the first rate at 15% for 2026-27; the More Cost of Living Relief Act 2025 already sets it at 14% from 2027-28.

  14. Upcoming — the outcome is not known

    First tax rate falls to 14%[2][5]

    Rate set by the 2025 act for the 2027-28 income year and later years (income from A$18,201 to A$45,000).

The debate

Citoyen takes no position: arguments are reported as their authors put them.

According to its supporters

  • The government argues that every taxpayer — all 13.6 million — gets a cut, against 2.9 million fewer under the original plan, and that 84% of taxpayers and 90% of women taxpayers get a bigger one: a person on about A$73,000 gains A$1,504, A$804 more than under the old plan.[11]
  • According to the Treasurer, Treasury advice shows the redesign returns more bracket creep to more people, raises labour supply by about 930,000 hours a week — more than double the old plan — and is broadly revenue neutral; he states that the Reserve Bank Governor confirmed it has no implications for the Bank’s inflation forecasts.[14]
  • Already in 2018, Labor senators criticised the original Stage 3: using Parliamentary Budget Office figures, they put its cost at A$10.35 billion a year by the end of the medium term, growing at about 12% a year, with almost 75% of the benefit going to men.[10]
  • Presenting the 2025 cuts, the Treasurer argues that they return bracket creep and encourage people to take an extra shift, which could raise hours worked by 1.3 million — mostly through women’s participation — while keeping fiscal settings consistent with inflation in the target band.[16]

According to its opponents

  • The Liberal-National opposition, while not opposing the bill, denounces a broken promise: according to the shadow Treasurer, the Prime Minister and the Treasurer had promised more than 100 times not to change the legislated Stage 3 cuts, on which many Australians had made commitments.[15]
  • The shadow Treasurer argues that the relief is funded by taxing one group more — « $28 billion of bracket creep » on aspirational taxpayers in the restored 37% bracket — and commits the Coalition to an election tax package « in keeping with » Stage 3.[15]
  • On the 2025 cuts, the shadow Treasurer calls them « 70c a day in over a year’s time », no answer to the fall in living standards; the opposition voted against the bill’s second reading.[17][19]
  • The Greens voted for the 2025 bill but call it a « tiny tax tweak » and a missed opportunity, arguing that making large corporations pay more tax would fund real relief such as dental care in Medicare.[18]

Indicators to watch

  • Employment rate, 15-64 · ABSSee the card →
  • Taxes on income, profits and capital gains, % of GDP · OCDEno Citoyen card yet
  • Gini index of disposable income · OCDESee the card →
  • General government budget balance, % of GDP · OCDESee the card →
  • Average tax rate of taxpayers · Treasuryno Citoyen card yet

Sources

  1. [1]Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024 (No. 3, 2024), as made — Federal Register of Legislation, March 5, 2024
  2. [2]Treasury Laws Amendment (More Cost of Living Relief) Act 2025 (No. 28, 2025), as made — Federal Register of Legislation, March 27, 2025
  3. [3]Treasury Laws Amendment (Tax Relief So Working Australians Keep More Of Their Money) Act 2019 (No. 52, 2019), as made — Federal Register of Legislation, July 5, 2019
  4. [4]Treasury Laws Amendment (Personal Income Tax Plan) Act 2018 (No. 47, 2018), as made — Federal Register of Legislation, June 21, 2018
  5. [5]Income Tax Rates Act 1986 (No. 107, 1986) — Compilation No. 66, in force on 1 July 2026 (Schedule 7) — Federal Register of Legislation, July 1, 2026
  6. [6]Treasury Laws Amendment (Cost of Living Tax Cuts) Bill 2024 — bill progress — Parliament of Australia
  7. [7]Treasury Laws Amendment (More Cost of Living Relief) Bill 2025 — bill progress — Parliament of Australia
  8. [8]Treasury Laws Amendment (Tax Relief So Working Australians Keep More Of Their Money) Bill 2019 — bill progress — Parliament of Australia
  9. [9]Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018 — bill progress — Parliament of Australia
  10. [10]Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018 [Provisions] — report, with the Dissenting Report from Labor Senators and the Greens Dissenting Report — Senate Economics Legislation Committee, June 18, 2018
  11. [11]Tax cuts to help Australians with the cost of living (media release) — Prime Minister of Australia, January 25, 2024
  12. [12]Albanese Government's cost-of-living tax cuts to roll out from July 1 (media release) — Prime Minister of Australia, February 27, 2024
  13. [13]New cost of living tax cuts under Labor (media release) — Prime Minister of Australia, March 25, 2025
  14. [14]House of Representatives Hansard, 6 February 2024 — Treasury Laws Amendment (Cost of Living Tax Cuts) Bill 2024, second reading (Jim Chalmers, Treasurer) — Parliament of Australia, February 6, 2024
  15. [15]House of Representatives Hansard, 7 February 2024 — Cost of Living Tax Cuts bills, second reading (Angus Taylor, shadow Treasurer) — Parliament of Australia, February 7, 2024
  16. [16]House of Representatives Hansard, 26 March 2025 — Treasury Laws Amendment (More Cost of Living Relief) Bill 2025, second reading (Jim Chalmers, Treasurer) — Parliament of Australia, March 26, 2025
  17. [17]House of Representatives Hansard, 26 March 2025 — More Cost of Living Relief Bill 2025, second reading (Angus Taylor, shadow Treasurer) — Parliament of Australia, March 26, 2025
  18. [18]House of Representatives Hansard, 26 March 2025 — More Cost of Living Relief Bill 2025, second reading (Adam Bandt, Leader of the Australian Greens) — Parliament of Australia, March 26, 2025
  19. [19]House of Representatives Hansard, 26 March 2025 — More Cost of Living Relief Bill 2025, division on the second reading (ayes 91, noes 52) — Parliament of Australia, March 26, 2025
  20. [20]House of Representatives Hansard, 2 July 2019 — Tax Relief So Working Australians Keep More Of Their Money Bill 2019, second reading (Josh Frydenberg, Treasurer) — Parliament of Australia, July 2, 2019
  21. [21]Budget 2026–27 Tax Explainer — New tax cuts for Australian workers — Australian Government — Treasury (budget.gov.au), May 2026