Navigating The Recent Tax Cuts: What You Need To Know
Discover how Australia's latest tax cuts impact you and the economy. Gain essential insights for navigating financial changes in 2024 and beyond. Learn about how they affect you and what strategies your family can implement to lower your tax liability.
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Overview Of The Recent Tax Cuts
In recent changes to the stage-three tax cuts in Australia, the government has reinstated the 37% tax bracket, lowered the rate for the bottom tax bracket from 19% to 16%, and increased the threshold for the top tax rate from $180,000 to $190,000. These changes are expected to impact Australians earning less than $135,000, with the most significant benefits for individuals earning between $120,000 and $135,000 as they are going to have the tax percentage reduction from 37% to 30%. It is important to compare these legislated stage-three tax cuts with the proposed changes reported by the Coalition and the Labor party to understand the full scope of the alterations.
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How The Tax Cuts Affect Individuals
The recent tax cuts will have varying effects on individuals based on their income levels. Australians earning less than $45,000 will receive a tax cut from July, with middle and high middle income households experiencing the largest average gains at tax time. Specifically, workers on $45,000 will benefit from a ~$804 tax reduction, while someone earning $120,000 will see a ~$2,679 decrease in tax cuts. Higher income earners on $180,000 a year will see a ~$3,729 reduction in their tax liability.
Strategies For Tax Planning and Minimisation
In light of the recent tax cuts, individuals can employ various strategies for tax planning and tax minimisation. For our clients, we employ a number of strategies to help them reduce their tax liability. A couple of strategies we use can include contributing money into super up to the contributions cap, another strategy which is popular among our clients is negative gearing to reduce your taxable income and therefore, increase your tax refund. By proper tax planning, and implementation of the right strategy, you can put more of your tax dollars back in your own pocket!
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Potential Benefits and Drawbacks Of Tax Cuts
The recent tax cuts are expected to deliver more relief to middle-income Australians and women, offering fairer tax relief under the Labor party's plan. However, it is important to consider that the recalibration of the stage three income tax cuts may encourage lower-income individuals to work more hours, contributing to inflation, while making negative gearing, through investing in property, more attractive for high-income earners.
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Conclusion and Encouragement
In conclusion, the new tax cuts are legislated and are to begin from the 1st of July 2024. There will be significant implications for individuals across different income levels. It is crucial for taxpayers, such as yourself, to engage in proactive tax planning and implement tax minimisation strategies to maximise the benefits of these tax cuts and consider the impact on your individual circumstances.
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Implications On Cost Of Living And Workforce Participation
The tax cuts implemented by the Albanese Labor Government aim to ease cost-of-living pressures for Australians, with a focus on delivering tax cuts for every taxpayer starting July 1 2024. The changes are anticipated to have implications on workforce participation, potentially making negative gearing more appealing for high-income earners and providing better workforce participation benefits compared to the previously planned elimination of the 37 per cent rate and ~$9075 tax cut for individuals earning more than $200,000.
If you are on $200,000 per year, your tax savings from the 1st of July is ~$4,529.
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