3 March 2024
Legislation giving effect to the government’s revised settings for the Stage 3 tax cuts has been passed by both houses of Parliament with the support of the Coalition.
The stage 3 tax cut changes:
- Reduce the 19% tax rate to 16% for incomes between $18,200 and $45,000.
- Reduce the 32.5% tax rate to 30% for incomes between $45,000 and the new $135,000 threshold.
- Increase the threshold at which the 37% tax rate applies from $120,000 to $135,000.
- Increase the threshold at which the 45% tax rate applies from $180,000 to $190,000.
A permanent tax saving
Many taxpayers and their advisers focus on timing issues around year-end by deferring income and bringing forward deductions. Legitimate steps can be taken to shift taxable income from one year to the next and most people would prefer to pay tax next year rather than this year. However, any benefit gained reverses in the following year when you have to do it all again just to stand still. It’s a lot of effort for a once off timing advantage.
The difference with the 1 July 2024 tax rate changes is that reducing your taxable income in 2023-24 and increasing it in 2024-25 (where it is taxed at a lower rate) produces a permanent saving over the two-year period – a saving you get to keep. That may make such timing issues worth another look.
Continue reading “Stage 3 tax cuts – a tax saving opportunity?”