Australia

What the government's tax cuts will mean for you

After a bit of wrangling in the Senate, the government's $158 billion tax cuts are set to pass the Parliament, so how much will you benefit?

The government has sold its $158 billion tax package as all about putting more money back in the pockets of Australians.

It took a little more than that promise to convince some crossbench senators to get on board.

Now, after a week of negotiations and some potential sweeteners, the government has got the numbers to pass the legislation on Thursday. 

That means the first of the three stages of tax cuts first promised in the budget in April will start to flow to those who are quick off the mark getting their tax returns in.

So exactly how much fuller will your pockets be when you get your tax return back this year and over the life of the 10-year plan? 

Senator Jacqui Lambie gives the thumbs up in the upper house.
Will you be as happy as Senator Jacqui Lambie about the tax cuts package?
AAP

Stage One

Not surprisingly when you're dealing with Australia's progressive tax system, it all depends on how much you earn. 

About 10 million workers who earned up to $126,000 in the 2018-19 financial year will get a bonus of up to $1080 when they lodge their tax return.  

Those earning between $48,000 and $90,000 will get the maximum amount.

The payment, known as a tax offset, then gradually reduces the more you earn above $90,000 until it hits just $1 for those on $125,333 a year.  

At the other end of the pay scale, those on less than $37,000 will get a $255 bonus. 

You can expect to reap the additional payment each year for the next three years. 

Stage Two

In three years time, the government will lift the upper threshold for the 19 per cent tax bracket from $41,000 to $45,000.

At the same time, the low-income offset will be increased from $645 to $700.

Independent Tasmanian Senator Jacqui Lambie was crucial to the fate of the tax cuts.
Independent Tasmanian Senator Jacqui Lambie was crucial to the fate of the tax cuts.
AAP

These are the changes that Labor wanted to bring forward to this year, but they failed to get the support of minor parties or the crossbench. 

Stage Three

The third and final stage of the plan has caused the most argy-bargy with Labor trying to shelve it and criticism it's unaffordable. 

The changes don't kick in for five years, during which time there will be at least one election, so even though they've passed the Parliament, don't bank on it just yet. 

But if all goes to plan for the government, from 1 July, 2024, the 32.5 per cent tax rate will drop to 30 per cent.

That means all Australians earning between $45,000 and $200,000 will pay the same amount tax rate of 30 per cent.

According to the government's sums, this means that over a decade, someone with an average taxable income of about $60,000 would be more than $15,000 better off.

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