Tax cuts are here! How much will you save?

July has arrived, and with it comes a new financial year. That will mean different things for different people, but for all Australians it means stage 3 tax cuts take effect. 

If you pay tax – and there are 13.6 million Aussies who do – you will now be paying less. How much less depends on your income bracket. In summary, from today:

  • the 19 per cent tax rate is reduced to 16 per cent,
  • the 32.5 per cent tax rate has been reduced to 30 per cent,
  • the 37 per cent tax threshold has increased from $120,000 to $135,000,
  • and the 45 per cent tax threshold has increased from $180,000 to $190,000.

Depending on which income bracket you fall into, the tax cuts mean your next pay packet should include a little bit more than your last (assuming that you currently do pay tax). However, the changes will have no effect your 2023-24 tax return, as they take effect from today. That means the new rates will only apply to your 2024-25 tax return. 

What will the stage 3 tax cuts mean for me?

Here’s how the five main tax brackets will be treated after the tax cuts take effect:

  • If you earn up to $18,200 in the 2024-25 financial year, you will pay no tax
  • For every dollar you earn above $18,200 and up to $45,000 you’ll pay 16 per cent tax
  • Earnings you make above $45,000 but below $135,001 will be taxed at 30 per cent
  • You will pay a 37 per cent tax rate on each dollar earned between $135,001–$190,000
  • And for those lucky enough to be earning more than $190,000, each dollar above that amount will be taxed at 45 per cent

It’s important to remember the higher rates apply only to the amount you earn above each threshold. For example, if your annual income is $55,000, then $18,200 of that total will remain untaxed, and you will pay 16 per cent on the amount earned up to $45,000. That would be $26,800 ($45,000 minus $18,200) taxed at 16 per cent. Only the remaining $10,000 (taking you up to $55,000) will be taxed at 30 per cent. 

There are a number of online calculators than can do the maths for you, depending on your income. This one on the ABC News website shows you how much better off you will be than last year after the tax cuts. In the example above, yearly total earnings of $55,000 will save $1054 in tax compared to last financial year. 

What else does July 1 bring?

As well as this year’s tax cuts, the beginning of the new financial year often heralds other legislative changes. This year is no exception. Among the changes to law that come into effect today, the manufacture and supply of engineered stone (including benchtops) will be banned in all states and territories.

Also coming into effect today is a change to the Work Health and Safety Act (2011). The change introduces the offence of industrial manslaughter. It carries a maximum penalty of 25 years’ prison and up to $18 million in fines.

All up, this means we should be able to enjoy a more prosperous and safer new financial year.

Will you be benefitting from the tax cuts? How much of a difference will it make? Let us know via the comments section below.

Also read: Tax breaks are coming, but bracket creep remains an issue

Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

Andrew Gigacz
Andrew Gigacz
Andrew has developed knowledge of the retirement landscape, including retirement income and government entitlements, as well as issues affecting older Australians moving into or living in retirement. He's an accomplished writer with a passion for health and human stories.
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