It has been just over a year since the revised Stage 3 tax cuts kicked in on 1 July 2024, and the question on every working Australian's mind is simple: am I actually better off? The short answer is yes — but the long answer is a fair bit more nuanced than either side of politics would have you believe.
A Quick Recap: What Changed?
The original Stage 3 plan, legislated under the Morrison government, would have scrapped the 37-cent bracket entirely and created a flat 30% rate for everyone earning between $45,001 and $200,000. The Albanese government revised those cuts in January 2024, keeping a progressive structure but delivering broader relief:
- The 19% rate dropped to 16% for income between $18,201 and $45,000
- The 32.5% rate dropped to 30% for income between $45,001 and $135,000
- The 37% rate now applies from $135,001 to $190,000
- The 45% top rate kicks in at $190,001 (down from $180,001)
The net effect? Every single taxpayer earning above the tax-free threshold received at least some benefit, rather than concentrating savings among higher earners. Use our Australian salary calculator to see exactly how the revised brackets affect your specific income.
The Numbers: How Much Are People Actually Saving?
Let us walk through a few real-world examples based on the 2025-26 tax tables.
A worker on $55,000 per year — close to the national median — is saving roughly $929 per year compared to the old rates. That works out to about $36 extra per fortnight. Not life-changing, but it adds up over time.
Someone on $90,000 saves about $1,679 per year, while a worker on $150,000 pockets an additional $3,729. Under the original Stage 3 design, that $55,000 earner would have received just $375, while the $150,000 earner would have scored over $4,500. So the revised plan genuinely did redistribute the benefit downwards.
Curious where you land? Plug your salary into our bonus tax calculator if you received a one-off payment this year, or use the salary calculator for your base income.
The Bracket Creep Problem
Here is the catch nobody in Canberra likes talking about: bracket creep has already started eating into those savings. When your wages rise with inflation but the tax brackets stay frozen, you end up paying a higher effective tax rate without earning any more in real terms.
The ATO data from the first half of FY2025-26 shows that average wages grew by roughly 3.8% over the past year. For someone on $90,000, that wage growth pushed approximately $3,420 of additional income into the 30-cent bracket — generating an extra $1,026 in tax. That wipes out more than half the Stage 3 benefit for that earner in a single year.
Treasury modelling from the 2025-26 Budget papers confirms the trend: without further bracket adjustments, the average effective tax rate will return to pre-cut levels within three to four years. So yes, the cuts are real, but they have a use-by date unless the government acts again.
Who Won and Who Lost?
The clear winners from the revised cuts are workers in the $40,000 to $80,000 range. These Australians received a meaningful percentage increase in take-home pay that the original plan would have largely ignored.
Higher earners above $150,000 still received generous cuts in dollar terms, but less than the original plan promised. If you are in that bracket, you might want to check whether salary sacrificing into super could claw back some of the difference — our superannuation calculator can help you model the impact.
The people who missed out entirely are those earning under $18,200 — the tax-free threshold has not moved since 2012-13, and there is growing pressure on the government to lift it. Pensioners and those on Centrelink payments also saw no direct benefit from the income tax changes.
What About Small Business Owners and Freelancers?
If you are self-employed, the Stage 3 cuts apply to your taxable income after deductions, just like any PAYG employee. The difference is that you are probably more exposed to the Medicare Levy Surcharge if you have not taken out private health insurance, and you need to stay on top of your quarterly BAS obligations.
Use our self-employed tax calculator to estimate your liability after deductions, and make sure you are setting aside enough each quarter to avoid a nasty surprise at tax time.
The Political Outlook
With a federal election due by May 2025 (at the latest), both major parties are under pressure to announce further tax relief. The Coalition has floated the idea of indexing brackets to inflation — a policy that would permanently solve bracket creep but cost the budget tens of billions over the medium term. Labor has hinted at targeted relief for lower earners, possibly by lifting the tax-free threshold to $20,000 or $21,000.
Whichever path Australia takes, the Stage 3 experience has proven one thing: broad-based tax cuts are popular, but they need to be maintained to remain effective. A one-off adjustment that gets eroded by bracket creep within a few years is not genuine reform — it is a sugar hit.
The Bottom Line
Are Australians better off after Stage 3? Yes, for now. The average full-time worker is keeping an extra $1,500 to $2,000 per year, and lower-income earners received a proportionally larger benefit than the original plan would have delivered. But the clock is ticking. Without further action on bracket creep, most of that benefit will evaporate by FY2027-28.
The smartest move you can make right now is to understand exactly where your money goes. Run your numbers through our salary calculator, check your super contributions, and make sure you are not leaving money on the table.