Low-income earners to benefit under stage three tax cut overhaul

Low-income earners are set to benefit from a rework of the controversial stage three tax cuts under a new plan to be put before federal cabinet tomorrow.

Prime Minister Anthony Albanese promised last week that the tax cuts will come into effect on July 1, but, should the changes be approved by cabinet, they'll look slightly different than what is currently planned.

The stage three tax cuts as currently legislated have faced criticism for benefitting higher income earners far more than those on smaller salaries and creating the potential to put upward pressure on inflation.

READ MORE: What the end of the 'lamington' offset and start of stage three tax cuts will mean for you

They would see the $120,001-$180,000 tax bracket abolished and everyone earning between $45,000 and $200,000 taxed at 30 per cent instead of between 32.5 and 45 per cent.

It would mean Australians earning $45,000 wouldn't get a tax cut, while someone taking home $200,000 would benefit to the tune of $9075.

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However, 9News understands the new plan to go before cabinet tomorrow would lower the top tax bracket to $180,000.

That would save $3.6 billion per year, which would then in turn be redistributed to lower-income earners, possibly through an increase to the tax-free threshold.

The change would mean people earning over $200,000 a year would receive a $6075 tax cut instead of $9075, while someone on $90,000 would get around $1400 instead of $1125.

Ultimately, all taxpayers will get a cut if cabinet rubber stamps the policy.

If approved, the new stage three cuts could be unveiled to Labor MPs in a special cost of living caucus on Wednesday before the Albanese addresses the National Press Club on Thursday.