You’ve probably heard about the government’s tax cuts which took effect on July 1 this year.
Here’s a very simple and brief report on how they may benefit you.
Why were the cuts brought in?
Some folks refer to the most recent and revised Stage 3 tax cuts as “cost of living tax cuts.” Why? The original tax cuts (Stage 1) were designed before the pandemic and the recent concerning hike in living costs. The government eventually revised them (Stage 3) to provide fairer relief to all Australians.
The government claims the cuts have but put in place to help low and middle-income earners by reducing the tax withheld from their pay. But when you look closely these changes they equally benefit high-income Australians (if not more so!)
What’s New?
- Lower Rates for Lower Incomes: If you earn between $18,201 and $45,000, your tax rate will drop from 19% to 16%. Happy days, but your income is low anyway so don’t expect to get rich!
- Higher Thresholds: The threshold for the 32.5% tax bracket will increase from $120,000 to $135,000, with the tax rate for this bracket dropping to 30%. We reckon these folks have the most to gain dollar for dollar.
- 37% Tax Bracket Maintained: The government decided to keep the 37% bracket, now applying to those earning $135,001 to $190,000.
- Top Earners: Those making over $190,000 will remain in the 45% tax bracket but will benefit from lower rates in other brackets. (If you are earning this sort of coin and aren’t looking for tax savings through long-term planning you should have your head read – thanks Mr Packer)
What is the tax rate for 2024-2025? Here’s a simple summary of last years tax rates and thresholds vs this year.
What’s the bottom line?
The million dollar question of course is (drum roll) how much extra I can expect in my take-home pay.
It depends of course on your income. The best and fastest way to be sure is to check out the ATO’s tax cut calculator.
When do i receive my tax cut?
When you lodge your tax return for 2023/24 you won’t be affected by these changes, and they won’t impact your tax refund.
What about next year? Possibly, but don’t forget you should now already be paying less tax every week* and getting a boost in your take-home pay starting July 1, 2024, so the tax savings are realised week on week.
As always, you will likely get a better result come tax time if you keep up to date, stay organized, claim all eligible deductions, and monitor your income and tax withholdings, and, use a tax pro.
Book here today, chat online or call us on 1300 TAX SHOP (1300 829 746) and you’ll be sure to avoid the above issues and you’ll pay only the tax you are required to legally.
*If your pay has not increased already, check with your employer. It would not be the first time a tax cut was missed by your payroll staff or bookkeeper due to not being properly registered for payroll tax !
Will I get a bigger tax refund in 2024 in Australia?
Tax refunds depend on various factors such as your income, deductions, and tax credits, which can change year-to-year. There are a few reasons why your refund may have been lower in 2024.
Check out our article here for details. https://accountantsdirect.com.au/8-reasons-why-you-got-a-low-tax-refund-in-2024/
