How will you spend your tax savings? A nice dinner or a wise investment…

The Australian Government’s cost of living tax cuts passed the Senate on 27 February and will become law, effective from 1 July 2024.

TAX RATES AND THRESHOLDS TO APPLY FROM 1 JULY 2024

The new brackets and rates are as follows:

Thresholds in
2023–24 ($)
Rates in
2023–24 (%)    
New thresholds in
2024–25 ($)
New rates in
2024–25 (%)
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
>180,000 45 >190,000 45

Plus 2% Medicare levy where applicable.

Below is a summary of how the current tax rates and thresholds will change from 1 July 2024.

  • The 19 per cent tax rate reduces to 16 per cent (for incomes between $18,200 and $45,000).
  • The 32.5 per cent tax rate reduces to 30 per cent (for incomes between $45,000 and the new $135,000 threshold).
  • The threshold above which the 37 per cent tax rate applies increases from $120,000 to $135,000.
  • The threshold above which the 45 per cent tax rate applies increases from $180,000 to $190,000.

While the maximum tax saving under the Stage Three Tax Cuts will now be $4,529, down from $9,075 under the previously legislated Stage Three Tax Cuts, these changes will provide greater benefit to low and middle income earners. For those people wondering, the crossover point where the previously legislated changes would have been more beneficial is taxable income of $146,490.

We will work with you to assist you to understand how these changes may impact your individual situation or business. Given the changes in rates and thresholds, some taxpayers may benefit from either delaying income and capital gains or bringing forward expenditure. It may also impact on decision making such as distributions from family trusts, dividends from private companies and deductible superannuation contributions.

 

SUPERANNUATION CONTRIBUTION CAPS INCREASE FROM 1 JULY 2024

The concessional and non-concessional contribution caps are summarised below:

Contribution Caps 2023-2024 2024-2025
Concessional Contributions Cap $27,500 $30,000
Non-Concessional Contributions Cap $110,000 $120,000
Bring forward $330,000 over 3 years $360,000 over 3 years

The superannuation contribution caps are indexed in accordance with average weekly ordinary time earnings (AWOTE). There has been no movement in the Total Superannuation Balance or Transfer Balance Cap which is $1.9m indexed in $100,000 increments in accordance with CPI.

 

PLANNING CONSIDERATIONS

For more information on how to best take advantage of the stage three tax cuts and increases in superannuation contribution caps, please contact your BYRONS accountant or wealth team.

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