Tax Cuts are a coming ... yep you read that right. Mark the calendar for 1 July 2024.
Why? The Liberal government believed the tax landscape in Australia needed a revamp (and trust us it does) so they were able to pass tax cuts before their stage left exit. Stage 1 and 2 have already been executed and stage 3 is on it's way (after some further tinkering from the Labour government), and we think it's pretty exciting (yes, taxes can be exciting! well for us anyway 😆).
Yay for the Government of the day finally deciding to be kinder to your wallet, to alleviate some of the increased cost of living pressures ... what with the increasing interest rates, inflation ... you get the drift, and we don't want you rocking in the corner, so we will move on to what is actually happening and the good news with the bracket creep beatdown.
Ever heard of 'bracket creep'? It's like a sneaky tax villain that nibbles away at your hard-earned cash. Well, the Government is suiting up to take this baddie down. By adjusting tax brackets, they're ensuring more of your money stays where it belongs - in your pocket! So, let's break this round of tax cuts into bite-sized chunks for you:
Reducing the 19% tax rate to 16% (this affects incomes between $18,200 to $45,000)
Reducing the 32.5% tax bracket to 30% (this affects incomes between $45k to a new threshold of $135K - woohoo!)
Minimum income level for the 37% tax bracket to increase from $120K to $135K up to $190K (as alluded to above - heck yeah!)
Minimum income level for the 45% tax bracket will be increasing from $180k to $190k (Insert happy dance).
For those who need a table (cos who doesn't 😆), here are the new tax brackets from 1 July 2024 in all their glory:
What does this all mean for you? Potentially more money in your bank account and less tax-time headaches. They are estimating that 13.6 million taxpayers will receive a tax break (that's alot of us right!)
So let's look at some averages:
A person on an average income of around $73,000 will get a tax cut of $1,504
A person earning $40,000 will get a tax cut of $654
A person earning $100,000 will get a tax cut of $2,179
A person earning $200,000 will still get a tax cut, which will be $4,529.
In addition, there will be an increase to the Medicare levy low-income thresholds for 2023-24.
This will benefit more than a million Australians, ensuring people on lower incomes continue to pay a reduced levy rate or are exempt from the Medicare levy. These are all changes we can cheer for - are we right!
Together, let's make the most of these tax tweaks and keep pushing towards our financial goals. Go team! and as always if you use Xero payroll they've got your back and will automatically update the tax bracket changes for you - Voila!
Need to know how this will impact you personally? Feel free to reach out to one of our oh so cool not nerdy at all team members to get the downlow. 😉
Disclaimer: The information provided is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice