Make the most of the 2024 tax cuts

The recent Australian government’s federal budget introduces income tax cuts, aiming to provide much-needed relief for every Aussie worker. These changes will alleviate financial stress and also open up possibilities for individuals to increase their working capacity and retain a larger portion of their earnings. Those set to receive the biggest benefits are middle income earners.

Using the MyBudget’s Income Tax Calculator, based on an average income of $73,000 individuals could receive an additional $1,504 annually. Despite the challenges some Australian taxpayers might be finding it hard to set aside the extra money for savings, MyBudget has some practical strategies that will help get the maximum benefit of this tax relief plan, even for those Australian households facing uncertainty with their financial situation. In this post, we’ll explore five examples to help  Australian workers leverage their stage-three tax cuts effectively, ensuring  they can prevent lifestyle inflation and serve as a tool for getting on top of the rising cost of living crisis.

What are the tax cuts for 2024?

Starting July 1, 2024, significant changes will occur in Australia’s tax system, including reductions in tax rates and adjustments to income tax thresholds. By understanding these changes, you can make informed decisions on how to make the most of this additional income over time.

According to taxcuts.gov.au the key takeaways from the 2024 Federal tax cuts are:

• The 19% tax rate will decrease to 16%.
• The 32.5% tax rate will decrease to 30%.
• The income threshold for the 37% tax rate will rise from $120,000 to $135,000.
• The income threshold for the 45% tax rate will rise from $180,000 to $190,000.

This results in the following monetary changes:

• An Aussie worker earning $40,000 will receive financial relief of $654.
• An average income of $73,000 will receive tax relief of $1,504.
• Those with an annual income of $100,000 will enjoy a tax reduction of $2,179.
• Even individuals earning $200,000 will still receive a cash savings, amounting to $4,529.

For more specific information tailored to your annual income, use the government’s free Tax Cut Calculator 

5 strategies for maximising tax cuts

At MyBudget, we want to help every Australian get the most out of their tax cut and find some cost of living relief. Here are five practical strategies to make this happen:

1. Use the extra money to cover daily expenses

Our first effective strategy is to budget your tax savings to help cover necessary expenses, rather than spending it on non-essential items. Consider setting up a separate high-interest savings account, where you can automate a portion, or all of your tax cut every pay-cycle. This account can be designated for expenses such as car registration, electricity bills, or other essential costs that typically arise throughout the year that may currently be difficult to keep up with. By consciously allocating your tax cut in this way, you can ensure its practicality and gain peace of mind, knowing that the funds for these expenses will be available when needed.

2. Pay off high interest debt

The next strategy is to use your tax benefit to pay off high-interest debt. If you have credit card debt or personal loans with high interest rates, automatically allocating your tax savings towards paying off these debts can save you a significant amount of money over time. By reducing your debt load, you can free up additional income to enhance your savings.

3. Boost your emergency savings

Our third option is to consider using your tax cut to establish or boost an emergency fund. This safety net will be reserved for unexpected expenses like medical bills, car repairs or loss of income. By setting up an automated transfer every pay cycle and directing your tax cut to a separate account, you’re taking proactive steps to safeguard your financial stability and better cope with life’s uncertainties.

4. Invest and see the benefits over time

Another great way to maximise your tax savings is to invest it. If you have already covered your necessary expenses and have paid off your high-interest debts, consider putting your tax cut towards investments that can generate additional income or help grow your wealth over time. Before making any investment decisions, it’s essential to do thorough research or consult with a financial advisor to ensure you make informed choices that align with your financial goals and risk tolerance.

5. Upskill and invest in yourself

Lastly, consider using your tax savings to invest in yourself. Upskilling can be a valuable investment in your personal and professional development. Save your 2024 tax cut each pay cycle and then take a course or attend workshop that can enhance your skills and knowledge in your chosen field. This can make you more competitive in the job market or even open up new opportunities for advancement or entrepreneurship.

How to maximise the 2024 tax cuts overall

Government tax cuts provide an exciting opportunity to take control of your finances and alleviate the burden of rising cost of living. By allocating your tax cut to budget for essential bills, build an emergency fund, invest or even upskill yourself, you can ensure that it serves a practical purpose and helps you stay on top of your financial obligations. By adopting these proactive approaches, you can navigate the challenges of inflationary pressures with confidence and resilience.

Allow 2024’s tax cuts to work in your favour, and enjoy the potential benefits of being prepared this July! Speak to MyBudget today and let us help you make the most of your tax cut. Our expert money coaches can guide you through the process of strategically allocating your tax cuts to meet your specific financial goals. Give us a call on 1300 300 922 or enquire online.