Stage 3 Tax Cuts Explained: How Much You Save in 2025-26 (With Examples)
The revised Stage 3 tax cuts save Australians $804 to $4,529 per year. See the new rates, how they compare to the original proposal, and calculate your exact savings by income level.
What are the Stage 3 tax cuts?
The Stage 3 tax cuts are a major reform to Australia's personal income tax brackets that took effect on 1 July 2024. Originally legislated by the Morrison Government in 2019 as part of a three-stage tax reform plan, the cuts were redesigned by the Albanese Government in January 2024 to spread the benefit more evenly across income levels. The original Stage 3 plan would have created a single 30% rate for all income between $45,001 and $200,000, abolished the 37% bracket entirely, and primarily benefited higher-income earners. The revised version instead lowered the bottom marginal rate from 19% to 16%, reduced the 32.5% rate to 30%, raised the 37% threshold from $120,000 to $135,000, and kept the top rate at 45% for incomes above $190,000. The result is that every taxpayer earning above $18,200 receives a tax cut, with the largest percentage savings going to low and middle-income earners.
Revised Stage 3 rates vs the original proposal
Here is a direct comparison. Under the original proposal (never enacted): $0-$18,200 nil, $18,201-$45,000 at 19%, $45,001-$200,000 at 30%, $200,001+ at 45%. Under the revised Stage 3 (now in effect): $0-$18,200 nil, $18,201-$45,000 at 16%, $45,001-$135,000 at 30%, $135,001-$190,000 at 37%, $190,001+ at 45%. The key differences are the lower 16% rate in the first bracket (instead of keeping 19%), the retention of the 37% bracket between $135,000 and $190,000, and the lower 45% threshold at $190,000 instead of $200,000. For someone earning $60,000, the revised plan delivers $1,304 in annual savings versus $804 under the original. For someone on $200,000, the revised plan saves $4,529 compared to $9,075 under the original. The government argued the revised version was fairer and more fiscally responsible.
How much do you save? Savings by income level
Compared to the pre-July 2024 tax rates, here are the annual tax savings under the revised Stage 3 cuts. At $40,000: save $654 per year ($12.58/week). At $50,000: save $1,304 ($25.08/week). At $60,000: save $1,304 ($25.08/week). At $70,000: save $1,304 ($25.08/week). At $80,000: save $1,304 ($25.08/week). At $100,000: save $2,179 ($41.90/week). At $120,000: save $2,679 ($51.52/week). At $140,000: save $3,729 ($71.71/week). At $160,000: save $3,729 ($71.71/week). At $180,000: save $3,729 ($71.71/week). At $200,000: save $4,529 ($87.10/week). The biggest percentage saving goes to someone earning $45,000 — they save $804, which is a 14% reduction in their total tax bill. For a dual-income household where both partners earn $80,000, the combined saving is $2,608 per year. These savings are automatic through your PAYG withholding — you do not need to do anything to receive them.
How Stage 3 cuts affect your take-home pay in 2025-26
Since the revised Stage 3 rates have now been in effect for a full financial year (and continue unchanged into 2025-26), the impact on your fortnightly or monthly take-home pay is already baked into PAYG withholding schedules. For an employee earning $80,000 gross, the fortnightly take-home pay (after tax and Medicare levy, before HECS) is approximately $2,413 — about $50 more per fortnight than under the old rates. At $100,000, fortnightly take-home is approximately $2,949 — roughly $84 more. At $60,000, fortnightly take-home is approximately $1,906 — about $50 more. If your employer has not updated their payroll tax tables since July 2024, you may not be seeing the full benefit in your pay, but you will receive the difference as a refund when you lodge your tax return. Use our Take-Home Pay Calculator to see your exact take-home figure under the current rates.
LMITO removal and its interaction with Stage 3
An important context for understanding the Stage 3 savings is the removal of the Low and Middle Income Tax Offset (LMITO). The LMITO provided up to $1,500 in tax relief for the 2021-22 financial year (including the one-off $420 cost of living bonus) and $1,080 for 2022-23, but it was not extended beyond 30 June 2023. This means that for workers earning $48,000 to $90,000, the end of LMITO in 2023 effectively increased their tax by up to $1,080 per year. The Stage 3 cuts partially offset this loss, but not entirely for all income levels. Someone earning $60,000 lost $1,080 from the LMITO removal but gained $1,304 from Stage 3 — a net benefit of $224 compared to 2022-23. However, someone earning $40,000 lost around $675 from LMITO and gained only $654 from Stage 3 — leaving them roughly $21 worse off in net terms. The Low Income Tax Offset (LITO) of up to $700 remains available and is separate from LMITO.
What comes next — will tax brackets change again?
As of March 2026, there are no legislated changes to personal income tax brackets beyond the current rates. The Stage 3 cuts were presented as the final stage of the three-part reform program. However, there is ongoing policy debate about bracket creep — the phenomenon where wage growth pushes workers into higher tax brackets even if their real purchasing power has not increased. With average wages growing at 3-4% per year, the fixed bracket thresholds mean more Australians are paying the 30% and 37% rates each year. Treasury forecasts show that by 2028-29, bracket creep will have effectively clawed back most of the Stage 3 tax cut for median-income earners. Some economists and the opposition have called for indexing tax brackets to inflation, as countries like the United States and Canada do. For now, the best approach is to understand the current rates and plan accordingly. Use our Tax Calculator to model scenarios for your income.
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General information and estimates only — not legal, financial, or tax advice. Always verify with the Fair Work Ombudsman (13 13 94) or a qualified professional.
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