I am yet to meet a taxpayer who doesn’t love the prospect of a tax cut…
The much talked about stage three tax cuts have recently passed the Senate and are now law. The changes were introduced as an attempt to help ease the cost of living pressures – especially for middle Australia – without adding to inflation.
According to the Grattan Institute, changes to tax rates will benefit the vast majority of taxpayers.
Under the new plan, all working Australians will receive a tax cut, but – unlike the original stage three plan, which focused on tax relief aimed exclusively at higher incomes – the scope of the new plan will now extend tax cuts to lower and middle incomes as well.
Of course, to stay within the $20 billion-or-so budget already allocated for the original plan, something had to give, and there’s plenty of opinion swirling around whether the government has hit the mark. Either way, the allocation (and reallocation) of tax savings – and the question of who benefits and by how much – is always going to be a contentious topic.
So without adding to the hype, let’s take a quick look at the recent changes.
| 2023-24 | 2024-25 | ||||||
| Thresholds ($) | Rates (%) | Thresholds ($) | Rates (%) | ||||
| 0 – 18,200 | Tax free | 0 – 18,200 | Tax free | ||||
| 18,201 – 45,000 | 19 | 18,201 – 45,000 | 16 | ||||
| 45,001 – 120,000 | 32.5 | 45,001 – 135,000 | 30 | ||||
| 120,001 – 180,000 | 37 | 135,001 – 190,000 | 37 | ||||
| Over 180,000 | 45 | Over 190,000 | 45 | ||||
Table 1. Personal income tax rates for the 2023-2024 financial year, and projected rates for 2024-2025, onwards. Excludes Medicare Levy (which is actually a tax in my view and should be wrapped into the tax brackets rather than added on. – Author)
Under the new plan, taxpayers with taxable incomes less than about $147,000 – which is almost 90% of Australian taxpayers – will receive a tax cut that’s either the same or larger than the tax cuts proposed under the old stage three plan. It’s clear the new plan is aimed at benefiting the many rather than the few.
Let’s get practical…
It could be worthwhile maximising tax-deductible expenses before 30 June 2024. This is because the effective tax saving from incurring the deduction in the current financial year will be higher than deferring until after 1 July 2024.
This can include items such as subscriptions, insurance premiums, superannuation contributions, tax-deductible donations, paying interest on investment loans or professional membership fees.
The ATO gets us started with a list of claimable deductions here.
From 1 July, all taxpayers will pay less tax which means more money in your pocket. And that is worth talking about.
As always, the team at Align Financial are here to help.
If you’d like to speak to an adviser, call us on (02) 9913 9995.
