What the new tax cuts mean for every Australian

Over the last few weeks, if you tuned into the news, opened a newspaper, or logged on to your favourite news website, you would have almost certainly read or heard one government minister or another say ‘cost-of-living pressures’.

It is true that it has been a challenging time for many Australians, with inflation and increasing costs of living squeezing already tight incomes and financial situations. According to research, almost 10 million Australians have less than $1,000 in the bank, should an emergency arise (or even if they simply want to have some fun).

The government’s response to cost-of-living pressures has included a tax cut to every tax-paying Australian as its marquee initiative. This tax cut to all 13.6 million Australian taxpayers came into effect on 1 July 2024 – so if you earn an income in Australia you’ve almost certainly started to see a benefit from it.

What, exactly, are the tax cuts?

Broken down, the changes to the individual income tax rates and thresholds from 1 July 2024 are as follows.

• the 19 per cent tax rate was reduced to 16 per cent;
• the 32.5 per cent tax rate was reduced to 30 per cent;
• the 37 per cent tax threshold was increased from $120,000 to $135,000; and
• the 45 per cent tax threshold was increased from $180,000 to $190,000.

We have also provided below a useful comparison of the income tax rates and thresholds of the years ended 30 June 2024 and 30 June 2025 to further demonstrate the above changes.

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.

Source: https://taxcuts.gov.au/

For employees, this means that your employer will be required to update your Pay As You Go withholding (PAYG) tax they withhold from your pay, each payday which will generally result in an increase to your take-home pay.

For employers (and business owners), this means that their finance function must ensure that it is withholding the correct amount of PAYG tax when paying their employees. This may involve ensuring that the payroll software provider that is being used by the employer or business owner has incorporated the new income tax rates and thresholds correctly.

It is important to note that accounting software automation will not automatically make these changes, so employees, in particular, should take it on themselves to compare their first pay slip after July 1 to their final pay slip before the new financial year. If they’re the same it would be a good idea to reach out to your employer and notify them that they need to update the accounting software.

If this is you, then don’t worry! The money hasn’t been lost. It simply means that for now, you’re having more tax withheld then you should. That additional gap will be returned to you when you submit your tax return at the end of this current financial year.

However, given the current cost of living environment, you probably do want that additional cash in hand right now.

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