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Last Updated: 23rd February, 2024

How The New Stage 3 Tax Cuts Boost Your Borrowing Power

Published by Otto Dargan on January 31, 2024

The Stage 3 Tax Cuts in Australia are expected to impact the borrowing power of individuals, particularly middle-income earners, by potentially increasing their income and borrowing capacity.

We did the calculations on how the changes affect your borrowing power.

How Your Borrowing Power Increases With The Stage 3 Tax Cuts

Our team of experts worked on calculating how the tax cuts affect your borrowing power.

Gross Annual Income Old Tax Cut New Tax Cut Increase In Income Max Borrowing Amount 2023-24 Max Borrowing Amount 2024-25 Increase in Borrowing Capacity
$20,000 $342 $288 $54 $50,644 $51,241 $597
$30,000 $2,242 $1,888 $354 $120,280 $123,863 $3,583
$40,000 $4,142 $3,488 $654 $190,394 $196,844 $6,450
$50,000 $6,717 $5,788 $929 $248,802 $258,000 $9,198
$60,000 $9,967 $8,788 $1,179 $312,466 $324,291 $11,825
$70,000 $13,217 $11,788 $1,429 $356,780 $370,994 $14,214
$80,000 $16,467 $14,788 $1,679 $393,211 $409,933 $16,722
$90,000 $19,717 $17,788 $1,929 $458,308 $477,539 $19,231
$100,000 $22,967 $20,788 $2,179 $482,317 $504,055 $21,738
$110,000 $26,217 $23,788 $2,429 $547,533 $571,781 $24,248
$120,000 $29,467 $26,788 $2,679 $612,750 $639,386 $26,636
$130,000 $33,167 $29,788 $3,379 $635,206 $668,889 $33,683
$140,000 $36,867 $33,138 $3,729 $696,003 $733,031 $37,028
$150,000 $40,567 $36,838 $3,729 $711,053 $748,200 $37,147
$160,000 $44,267 $40,538 $3,729 $771,731 $808,878 $37,147
$170,000 $47,967 $44,238 $3,729 $832,528 $869,556 $37,028
$180,000 $51,667 $47,938 $3,729 $870,511 $907,659 $37,148
$190,000 $56,167 $51,638 $4,529 $923,306 $968,336 $45,030
$200,000 $60,667 $56,138 $4,529 $951,017 $996,167 $45,150
$210,000 $65,167 $60,638 $4,529 $1,003,811 $1,048,842 $45,031
$220,000 $69,667 $65,138 $4,529 $1,056,606 $1,101,637 $45,031
$230,000 $74,167 $69,638 $4,529 $1,109,281 $1,154,431 $45,150
$240,000 $78,667 $74,138 $4,529 $1,162,075 $1,207,106 $45,031
$250,000 $83,167 $78,638 $4,529 $1,149,653 $1,194,684 $45,031

(The calculations in the table are based on the following assumptions: Single applicant with no dependants, purchasing an owner-occupied property with an 80% loan-to-value ratio. The income considered is solely the PAYG base salary, and there are no additional liabilities. Living expenses are assessed using the Household Expenditure Measure. The loan term assumes a 30-year principal and interest loan with a standard variable rate of 6.45% and a buffer rate of 3%.)

The borrowing capacity of those making $80,000 could increase by $16,722, and a higher-income earner making $150,000 can borrow an additional $41,019.

What Are The Changes In The Stage 3 Tax Cuts?

The changes include a lower tax for those in the lower-to-middle-income range from $18,201 to $135,000, increasing the threshold for the highest tax bracket to $190,000, and flattening the brackets where most income earners fall. The changes are expected to provide relief from “bracket creep” and make the tax system simpler.

If approved by Parliament, the tax cuts will go into effect on 1 July this year.

Tax Bracket New Tax Cuts Previous Tax Cuts
Earn up to $18,200 Pay no tax Pay no tax
$18,201-$45,000 16% tax rate 19% tax rate
$45,001-$135,000 30% tax rate 32.5% tax rate
$135,001-$190,000 37% tax rate 37% tax rate
Above $190,000 45% tax rate 45% tax rate

Get The Experts On Your Side

With increased income and borrowing capacity come new opportunities for financial planning. It’s crucial to assess your situation and align your financial goals.

If you aim to buy a home and invest wisely, the team at Home Loan Experts are passionate about helping you. Call us on 1300 889 743 or enquire online free, today.

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