The new financial year brings a range of changes that present both opportunities and challenges for Australian taxpayers. By understanding these changes and adjusting your financial strategies, you can maximise your benefits and secure a stronger financial future.
As we embark on the new financial year, Australian taxpayers face a series of significant changes that will impact their tax and superannuation landscape. With 13.6 million taxpayers affected, understanding these changes is crucial to making informed decisions about your financial future[i]. From tax rate reductions to revised superannuation contribution limits, this comprehensive guide will help you navigate these changes effectively:
The impact of tax rate cuts
The most high-profile change this financial year is the reduction in tax rates from 1 July. According to the Federal Government, these tax cuts are designed to benefit every taxpayer, providing an opportunity to review and optimise your tax, super, and investment strategies[ii]. These changes aim to protect taxpayers, particularly those in low- to middle-income brackets, from bracket creep—where inflation pushes income into higher tax brackets, increasing tax liability without a corresponding increase in real income[iii].
Thresholds in 2023–24 ($) |
Rates in 2023–24 (%) |
Thresholds in 2024–25 ($) |
Rates in 2024–25 (%) |
0 – 18,200 |
Tax free |
0 – 18,200 |
Tax free |
18,201 – 45,000 |
19 |
18,201 – 45,000 |
16 |
45,001 – 120,000 |
32.5 |
45,001 – 135,000 |
30 |
120,001 – 180,000 |
37 |
135,001 – 190,000 |
37 |
Over 180,000 |
45 |
Over 190,000 |
45 |
Table 1: New individual tax rates and thresholds for 2024–25 (Taxcuts, 2024)
For an Australian earning the median taxable income of $53,041[iv], this means they are to receive an annual tax cut of $1,005, which will be reflected in their take-home pay, each payday.
Taxable income |
Tax cut 2024-25 |
$40,000 |
$654 |
$50,000 |
$929 |
$60,000 |
$1,179 |
$70,000 |
$1,429 |
$80,000 |
$1,679 |
$90,000 |
$1,929 |
$100,000 |
$2,179 |
$110,000 |
$2,429 |
$120,000 |
$2,679 |
$150,000 |
$3,729 |
$180,000 |
$3,729 |
$200,000 |
$4,529 |
Table 2: Annual tax cuts for various annual taxable income amounts (Taxcuts, 2024)
With additional disposable income now available, it is essential to consider how best to use these funds. Depending on your individual circumstances, you might look into contributing more to your superannuation account or paying down non-deductible debt such as your mortgage.
Contributing more to your superannuation can significantly boost your retirement savings, benefiting from the compounding effect over time. Higher super contributions also offer tax advantages, as concessional (pre-tax) contributions reduce your taxable income, providing immediate tax relief. Additionally, paying down non-deductible debt can result in substantial long-term savings by reducing interest costs and improving your overall financial security.
Medicare Levy threshold uplift
Changes resulting from the May 2024 Federal Budget include an increase in the low-income threshold for the Medicare Levy. This adjustment is designed to exempt low-income earners from paying the levy or ensure they pay a reduced rate.
For the 2024-25 financial year, individuals earning $26,000 or less are exempt from paying the Medicare levy. The levy gradually increases, with the full 2% levy applying to incomes over $32,500[v]. This change aims to alleviate the financial burden on low-income taxpayers, ensuring they have more disposable income to meet their needs.
Superannuation Guarantee (SG) rate changes
Starting 1 July 2024, the Superannuation Guarantee (SG) rate increased from 11% to 11.5% of ordinary times earnings, with a further rise to 12% scheduled for 1 July 2025. This change is intended to bolster employees’ retirement savings, providing a more secure financial future.
In addition, the quarterly maximum super contributions base (MSCB) also rose to $65,070, up from $62,270. Employers are not required to provide SG contributions for any salary amount above this limit. This adjustment ensures that super contributions remain manageable for employers while still enhancing employees’ retirement savings.
Revised super contribution caps
From 1 July, the caps governing super contributions have seen notable increases, providing greater flexibility for boosting retirement savings. The concessional (before-tax) contributions cap increased to $30,000, up from $27,500 in the previous financial year[vi]. This allows for more tax-efficient retirement savings, reducing taxable income and providing immediate tax relief.
The annual non-concessional (after-tax) contributions cap also rose to $120,000, up from $110,000. This increase means the bring-forward rule limit now sits at $360,000 over three years, up from $330,000[vii]. For business owners, the CGT cap amount for eligible tax-advantaged contributions has increased to $1,780,000 from $1,705,000[viii]. These adjustments provide more opportunities to grow your superannuation balance, ensuring a more comfortable retirement.
Planning your financial future
With these changes, it’s essential to review your current financial plan and make necessary adjustments. Here are some areas to consider:
Increasing super contributions
Given the higher contribution caps, now is an excellent time to contribute more to your superannuation. This strategy not only enhances your retirement savings but also offers tax advantages. Concessional contributions reduce your taxable income, providing immediate tax relief, while higher contributions mean more funds growing tax-effectively within your super account.
Paying down debt
Using your additional disposable income to pay down non-deductible debt can yield significant long-term benefits. Reducing debt levels can result in substantial interest savings, improving your overall financial health. Lower debt levels also enhance your financial stability, especially in uncertain economic times.
Optimising pension entitlements
For those nearing retirement or already retired, understanding how the changes in the Medicare Levy threshold and super contribution caps impact your pension entitlements is essential. Ensuring your asset declarations are accurate and strategically planning your super contributions can help you avoid unnecessary reductions in pension entitlements and leverage available tax advantages.
Consulting with a financial adviser can provide personalised insights and strategies tailored to your unique circumstances. With expert guidance, you can confidently navigate the evolving financial landscape and make the most of the new financial year’s opportunities.
If you would like more information on how these tax and super changes may impact you, or further clarification on strategies for retirement, contact our office today.
DISCLAIMER: All information on Focus Wealth Advisers is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider your personal circumstances and seek professional advice before making any decisions based on this information.
[i] Budget 2024-25 (2024) Easing cost-of-living pressures
[ii] Tax cuts (2024) Tax cuts for every taxpayer
[iii] Budget 2024-25 (2024) Easing cost-of-living pressures
[iv] ATO (2024) Individuals – median and average key items, by sex, 2020–21 and 2021–22 income years
[v] ABC News (2024) Low-income earners to get up to $172 from Medicare levy indexation
[vi] ATO (2024) Concessional contributions cap
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