What is a tax cut?
Tax cuts are a change to individual income tax rates and thresholds which result in a reduction in a taxpayer’s tax liability (the amount of individual income tax a person needs to pay).
This is different from a tax refund, which is the money you receive back from the Australian Taxation Office (ATO) if you paid more tax than you need to when you submit your tax return at the end of a financial year.
When will I receive my tax cut?
New individual income tax rates and thresholds apply to all taxable income you earn from 1July2024.
For most taxpayers, your tax cut will be reflected in your take-home pay, each payday.
Some taxpayers will receive their tax cut when a tax return is lodged and processed after the end of the 2024‑25 financial year.
These tax cuts do not impact your 2023‑24 tax return.
How will I receive my tax cut?
If you’re an employee, your employer will update the amount of Pay As You Go withholding (PAYG) tax they withhold from your pay, each payday.
Check your payslip, and if you are still not sure if you are receiving your tax cut, ask your employer if they are using the new withholding tax rates.
Employers need to use the new rates and tax tables from 1July2024. New tax tables are available from ato.gov.au/taxtables.
New individual tax rates and thresholds for 2024–25
This table compares the individual income tax rates and thresholds for 2023–24 with the new tax rates and thresholds for 2024–25.
| Thresholds in 2023–24 ($) | Rates in 2023–24 (%) |
|---|---|
| 0 – 18,200 | Tax free |
| 18,201 – 45,000 | 19 |
| 45,001 – 120,000 | 32.5 |
| 120,001 – 180,000 | 37 |
| Over 180,000 | 45 |
| Thresholds in 2024–25 ($) | Rates in 2024–25 (%) |
|---|---|
| 0 – 18,200 | Tax free |
| 18,201 – 45,000 | 16 |
| 45,001 – 135,000 | 30 |
| 135,001 – 190,000 | 37 |
| Over 190,000 | 45 |
How do income tax rates and thresholds work?
If you are an Australian taxpayer, you are entitled to the tax-free threshold of $18,200. This means you can earn up to $18,200 each year without paying tax.
If you earn between $18,201 and $45,000:
- your first $18,200 remains tax free, and
- you will pay 16cents tax on every dollar you earn between $18,201 and $45,000.
If you earn between $45,001 and $135,000:
- your first $18,200 remains tax free, and
- you will pay 16cents tax on every dollar you earn between $18,201 and $45,000, plus
- 30 cents tax on every dollar you earn between $45,001 and $135,000.
If you earn between $135,001 and $190,000:
- your first $18,200 remains tax free, and
- you will pay 16cents tax on every dollar you earn between $18,201 and $45,000, plus
- 30 cents tax on every dollar you earn between $45,001 and $135,000, plus
- 37 cents tax on every dollar you earn between $135,001 and $190,000.
If you earn over $190,000:
- your first $18,200 remains tax free; and
- you will pay 16cents tax on every dollar you earn between $18,201 and $45,000, plus
- 30 cents tax on every dollar you earn between $45,001 and $135,000, plus
- 37 cents tax on every dollar you earn between $135,001 and $190,000, plus
- 45 cents tax on every dollar you earn above the $190,000 threshold.
Certain taxpayers, such as low-income taxpayers and senior Australians may also be eligible for tax offsets that directly reduce their final tax liability.
For more information on paying tax on your income, visit the Australian Taxation Office website.
