What are the Stage 3 tax cuts in Australia?

The Stage 3 tax cuts are changes to Australia's income tax brackets that took effect from 1 July 2024. They replaced the previous 19% and 32.5% rates with a single 16% rate on income from $18,201–$45,000, and a 30% rate on income from $45,001–$120,000. The 37% bracket was retained for $120,001–$180,000.

When did the Stage 3 tax cuts start?

The Stage 3 tax cuts began on 1 July 2024 (the start of the 2024-25 financial year). They continue in the 2025-26 financial year and beyond under current legislation.

How much did the Stage 3 tax cuts save Australians?

The savings vary by income. A person earning $50,000 saves around $1,029 per year. Someone earning $80,000 saves approximately $1,679 per year. A $120,000 earner saves around $2,829 per year compared to the previous 2023-24 tax rates.

Did higher-income earners benefit more from Stage 3 tax cuts?

Yes, in absolute dollar terms. Because the cuts reduced a wider bracket (32.5% → 30%) that applies over a larger income range for higher earners, the dollar savings are larger for those earning $80,000–$120,000. However, as a percentage of income, middle-income earners saw proportionally similar benefits.

Were the Stage 3 tax cuts changed from the original plan?

Yes. The original Stage 3 plan (passed in 2019) would have abolished the 37% bracket and applied a flat 30% rate from $45,001 to $200,000. The Albanese Government redesigned the cuts in early 2024 before they commenced, introducing the 16% rate, keeping the 37% bracket, and capping the 30% bracket at $120,000. The redesigned cuts provided more benefit to lower-income earners.

Stage 3 Tax Cuts Australia: How They Changed Your Take-Home Pay

CalculatorQuest Editorial Team

Australian Tax & Finance Specialists

Australian Tax & FinancePublished February 20266 min readEditorial standards ↗

The Stage 3 tax cuts are the most significant restructuring of Australia's income tax brackets in decades. They took effect from 1 July 2024 and continue to apply in the 2025-26 financial year. Here is what changed and exactly how much you save.

Use our Australian pay calculator to see your exact take-home pay under the current 2025-26 rates.

Old vs New Tax Brackets: The Full Comparison

Income Range	Rate Before 2024-25	Rate from 2024-25 (Stage 3)
$0 – $18,200	0%	0%
$18,201 – $45,000	19%	16% ↓
$45,001 – $135,000	32.5% (to $120k), 37% ($120k–$135k)	30% ↓
$135,001 – $190,000	37%	37% (higher threshold ↑)
$190,001+	45%	45% (unchanged)

Two key changes: the 19% rate dropped to 16% (on $18,201–$45,000), and the 32.5% rate dropped to 30% (on $45,001–$120,000). The top two brackets were unchanged.

How Much More Do You Take Home?

Here is the annual tax saving for common salary levels compared to the pre-2024 rates:

Salary	Old Tax (2023-24)	New Tax (2025-26)	Annual Saving
$50,000	$6,567	$5,538	+$1,029
$60,000	$10,038	$8,688	+$1,350
$70,000	$14,213	$11,788	+$1,429
$80,000	$17,463	$14,788	+$1,679
$100,000	$24,188	$20,188	+$2,279
$120,000	$29,467	$26,788	+$2,679
$150,000	$40,838	$36,838	+$4,000

Note: Old tax figures use 2023-24 brackets and LITO amounts. New figures use 2025-26 rates. Medicare levy not included in comparison (same 2% in both years).

The Redesigned Stage 3: What Changed?

The original Stage 3 plan — legislated by the Morrison Government in 2019 — was more radical. It would have:

Applied a flat 30% rate from $45,001 all the way up to $200,000
Abolished the 37% bracket entirely
Cut the 19% rate to 16% (same as the final version)

The Albanese Government redesigned the cuts in January 2024 (before they commenced in July 2024) to:

Keep the 16% rate on $18,201–$45,000 ✓
Apply 30% only from $45,001 to $120,000 (not $200,000)
Retain the 37% bracket for $120,001–$180,000
Raise the 19% bracket's starting threshold from $18,200 to $18,200 (unchanged)

Who Benefits Most from Stage 3?

The redesigned cuts prioritised lower and middle-income earners more than the original plan:

$45,000–$120,000 earners: Maximum benefit — every dollar in this range dropped from 32.5% to 30%.
$18,201–$45,000 earners: Significant benefit from the 19% → 16% rate change (~$804 saving at $45,000).
Above $120,000: Save the maximum $2,829 (the 2.5% saving across $45,001–$120,000 = $75,000 × 2.5% = $1,875 from the upper bracket, plus the lower bracket saving).

Impact on Take-Home Pay

Want to see your full take-home pay under the current 2025-26 Stage 3 rates? Use our salary breakdown guides for common income levels:

Calculate Your Take-Home Pay Under Stage 3

Enter your salary and see exactly how much you take home under the 2025-26 Stage 3 tax brackets.

Use the Free Pay Calculator →

Sources: ATO Tax Rates 2025-26 · Australian Government Budget · Last updated: February 2026