The Stage 3 tax cuts came into effect on 1 July 2024 and continue through 2025-26. Most working Australians have been getting a slightly bigger take-home pay packet ever since — but the size of the benefit varies enormously depending on your income, and the original "everyone pays one flat rate" version was substantially redesigned by the Albanese government in early 2024. This article walks through what actually changed, who gained the most, and how much extra is in your pocket every fortnight.

What were the Stage 3 cuts originally?

The Stage 3 changes were legislated by the Morrison government in 2018 as the third and final phase of a multi-year tax reform package. As originally designed, Stage 3 would have:

  • Abolished the 37% bracket entirely
  • Lifted the 32.5% (later 30%) bracket to apply from $45,000 all the way up to $200,000
  • Kept the top 45% rate but only above $200,000

The effect would have been a single 30% marginal rate covering most of middle and upper-middle Australia.

What actually happened in 2024

In late January 2024, the Albanese government redesigned Stage 3 before it took effect. The redesigned version, which is what's now in force for 2025-26, kept the broad shape but redistributed benefits towards lower and middle earners:

Bracket Pre-Stage 3 (2023-24) Stage 3 (2025-26)
$0 – $18,200 Nil Nil
$18,201 – $45,000 19% 16% (cut from 19%)
$45,001 – $120,000 (old) / $135,000 (new) 32.5% 30% (cut from 32.5%)
$120,001 – $135,000 (band shift) 37% 30%
$135,001 – $180,000 (old) / $190,000 (new) 37% 37% (kept; threshold lifted)
$180,001 – $190,000 (band shift) 45% 37%
$190,001+ 45% 45%

The biggest single change is the lowest bracket dropping from 19% to 16%. Every taxpayer earning over $18,200 gets the benefit of that cut on their first $26,800 of taxable income.

Worked take-home pay impact

The numbers below show the annual tax saving at five common income levels, comparing pre-Stage 3 (the 2023-24 brackets) with the current 2025-26 brackets. They include the 2% Medicare levy and the Low Income Tax Offset where applicable.

$50,000 salary

  • 2023-24 income tax + Medicare: $7,533 + $1,000 = $8,533
  • 2025-26 income tax + Medicare: $6,538 + $1,000 = $7,538
  • Saving: ~$995/year (~$38/fortnight)

$80,000 salary

  • 2023-24: $16,467 + $1,600 = $18,067
  • 2025-26: $14,788 + $1,600 = $16,388
  • Saving: ~$1,679/year (~$65/fortnight)

$120,000 salary

  • 2023-24: $29,467 + $2,400 = $31,867
  • 2025-26: $26,788 + $2,400 = $29,188
  • Saving: ~$2,679/year (~$103/fortnight)

$180,000 salary

  • 2023-24: $51,667 + $3,600 = $55,267
  • 2025-26: $46,438 + $3,600 = $50,038
  • Saving: ~$5,229/year (~$201/fortnight)

$250,000 salary

  • 2023-24: $84,667 + $5,000 = $89,667
  • 2025-26: $77,488 + $5,000 = $82,488
  • Saving: ~$7,179/year (~$276/fortnight)

The original (Morrison-era) Stage 3 would have given a $250k earner roughly $9,075/year. The redesigned version gives them $7,179. The difference — about $1,900 — was redistributed to taxpayers earning under $150,000.

Who gained the most relative to income?

In dollar terms, top earners gain the most absolute savings. In percentage terms it's flipped:

Salary Annual saving As % of gross income
$50,000 $995 1.99%
$80,000 $1,679 2.10%
$120,000 $2,679 2.23%
$180,000 $5,229 2.91%
$250,000 $7,179 2.87%

Middle earners ($60k–$120k) — the largest single block of Australian taxpayers — see roughly a 2% bump in disposable income. That's not life-changing on its own, but when paired with bracket creep relief and indexation that no longer eats those gains as fast, it does compound.

What didn't change

A few common misconceptions:

  • The tax-free threshold is still $18,200. Stage 3 didn't change it.
  • The Medicare levy is still 2%. It applies to taxable income above the low-income thresholds (~$27,222 for singles in 2025-26).
  • HECS/HELP repayments still apply on top. A $80k earner with a HECS debt also pays roughly $3,200 in compulsory HECS repayments — Stage 3 doesn't touch that.
  • The 45% top rate still kicks in at $190,001. It wasn't abolished, just had its threshold lifted.

What's coming after Stage 3

The 2025 Federal Budget legislated two further small cuts that flow through after Stage 3:

  • From 1 July 2026: the 16% bracket falls to 15%.
  • From 1 July 2027: the same rate falls to 14%.

That's another roughly $268 per year for anyone earning above the LITO phase-out, kicking in on top of Stage 3.

How to estimate your own take-home pay

Plug your income into the Calcula income tax calculator — it applies the current 2025-26 brackets, the Medicare levy and LITO automatically, and shows weekly, fortnightly, monthly and annual take-home pay. If you want to model HECS or salary sacrifice on top, the calculator includes toggles for both.

A short reminder on advice

This article explains how the Stage 3 changes affect generic incomes; it does not advise you on your individual situation. If you have salary sacrifice arrangements, multiple income streams, capital gains, deductions, or are mid-year through a job change, your real tax position will differ. Speak to a registered tax agent or accountant before making decisions based on these numbers.

For the official source, see the ATO — Tax rates: Australian residents page.