In the 2018 Budget, the government announced a radical plan to reshape the income tax system over the next seven years. While the first stage of the plan largely involves tax refunds for low and middle income earners, stage two and three would remove the 37 per cent tax bracket – and, as a consequence, flatten Australia’s tax system.
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Part of stage two and all of stage three would increase the 32.5 per cent tax threshold from $90,000 to $200,000 and remove the 37 per cent tax bracket. When the plan is fully implemented in 2024-25, it would mean that someone on $41,001 would face the same marginal tax rate as someone on $200,000 and 83 per cent of all taxpayers would be in the same tax bracket.