Tax Cuts: What Will the Changes in Taxes Mean for Me?

In order to alleviate the ongoing pressures of the cost of living, Prime Minister Anthony Albanese has announced adjustments. As of July 1, 2024, all 13.6 million Australian taxpayers would receive a tax discount of their 2023–2024 taxes.

This is the time to evaluate how the new laws, which go into effect on July 1, 2024, will affect your wallet and potential effects on end-of-fiscal-year preparation.

The former Coalition administration implemented a series of tax reforms nearly six years ago, with the goal of protecting middle-class taxpayers from tax bracket creep, simplifying the tax code, and delivering tax cuts to the majority of people. The Federal administration has now made adjustments to the third stage of these reforms.

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• Every Australian taxpayer will receive tax relief from the Albanese Labor Government as of July 1.
• The purpose of these new tax cuts is to make our tax system fairer while giving middle-class Australians larger tax breaks to assist with the cost of living.
• The Albanese Government acknowledges the harsh economic conditions of 2024: Australians currently face hardships and ought to receive a tax reduction.
• 13.6 million Australians will significantly benefit from the tax reforms, which will ensure that hardworking citizens keep a larger portion of their earnings.

Data from https://treasury.gov.au/tax-cuts

Proposed Modifications

Under the new regulations, those making between $45,001 and $135,001 will see a reduction in the marginal tax rate from 32.5% to 30% and a reduction in the lowest tax rate from 19% to 16%.

The present marginal tax rate of 37% will remain in place for everyone making between $135,001 and $190,000, while income earners with taxable incomes beyond $190,000 will now be subject to the 45% rate. Furthermore, for the current financial year (2023–24), there will be an increase in the low-income level for Medicare levy reasons.

In 2023–24, a single taxpayer with a $190,000 taxable income paid $59,967 in taxes. As a result of the new regulations, their tax liability will drop by $4,529 to $55,438. Even yet, this is less than the $7,575 tax decrease that would have been obtained had the original Stage 3 tax cuts been implemented.

However, the new regulations will result in a larger tax cut for low-income taxpayers.

Under the new regulations, a single taxpayer with a taxable income of $40,000 who paid $4,367 in taxes in 2023 will now receive a $654 tax relief. Under the previous Stage 3 tax plan, this individual would not have benefited.

Effects for Investment Strategies

There is a key takeaway for high-income earners from the government’s recent tax law amendments. You will now receive less in after-tax income than you might have anticipated beginning July 1, 2024.

Given this reduction, it makes sense to review and make sure any investment options you had in mind to benefit from your greater tax savings still make sense.

For instance, the value of real estate investing may be impacted by the lesser tax decrease for some.

On the other hand, investment techniques like negative gearing into real estate or stock can gain popularity. especially for investors searching for ways to avoid switching to a higher tax rate who are nearing the new tax levels.

Timing of Expenditure and Expenses

When performing maintenance or repairs on an existing investment property, investors should take another look. The expense might be better suited for the current fiscal year, depending on your situation, because of the change in tax rates that will take effect on July 1, 2024.

Reviewing the sale of an asset subject to CGT is also necessary in order to choose the optimal financial year in terms of tax consequences.

Looking at investment ideas that involve contributing to your super account is one of the others.

Contact Success Accounting Group Today!

Seek guidance to make sure the timing of your approach still makes sense if you are thinking about salary sacrificing extra amounts, making carry-forward concessional contributions, or bringing forward tax-deductible personal super contributions before June 30.

Get in touch with us right now if you need assistance assessing your superannuation contributions or investing strategy in light of the new regulations. Contact Success Accounting Group today!

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