Tax Cuts: 1 July 2024
Announced Tax Changes
On 25 January 2024, Prime Minister Anthony Albanese announced revised tax measures with significant changes to be made to income tax rates, across various brackets from 1 July 2024. The lowest income tax rate has been reduced from 19% to 16%, affecting individuals earning between $18,201 and $45,000. This adjustment is expected to provide tax relief for lower-income earners, a move designed to ease the financial burden for those with modest incomes and part-time workers.
For middle-income Australians, the second tax rate has been lowered from 32.5% to 30%, applicable to income up to $120,000.
Further changes include an increase in the threshold for the top tax rate of 45% from $180,000 to $190,000. This marks the first adjustment to the top marginal tax rate threshold since 2008.
Whilst these changes have not yet been passed in Parliament, a summary of the tax bracket and rate changes announced by Albanese are as follows:
For Taxpayers to Consider
While these tax cuts are legislated, there remains a small risk of government changes before 1 July 2024 in the future budget. Assuming that these tax cuts go ahead it may be worth considering proactive tax planning to make the most of the current and changing tax landscape.
There may be opportunities for taxpayers to bring forward tax deductions into the current financial year where the current tax rates are higher so a greater deduction benefit may be received in the 2024 financial year.
If your super balance is below $500,000 and your income is between $120,000 and $200,000 in the current financial year, it may be an option to utilise any unused carry-forward concessional contributions caps in the 2024 financial year. Making higher concessional superannuation contributions prior to 30 June 2024 may increase the tax benefit received.
Another consideration that may benefit some taxpayers is to delay events that may lead to an increase in taxable income in the 2024 financial year. This could even include a capital gains tax event, where you may potentially pay a lower rate of tax in the 2025 financial year rather than the 2024 financial year.