Updated Stage 3 Tax Cuts: Are There Opportunities for You?
You may have some tax-saving opportunities with the recently announced Updated Stage 3 Tax Cuts. These go to Parliament this week and are likely to pass. The Coalition says it will support the legislation, and the new tax rates will apply from 1 July 2024.
While the original Stage 3 Tax Cuts have been legislated, the Updated Stage 3 Tax Cuts still need to be agreed to by this Federal Parliament. Why? Labour decided to redistribute some of the planned tax savings for higher-income earners to lower-income earners to assist them with cost-of-living pressures. (Nothing to do with the election early next year).
Summary of the Changes
These are the planned changes to tax rates for 2024/25 (excluding Medicare levies):
As a result of these changes, for example:
• High-income earners earning $200,000 will have their proposed tax savings slashed from $9,075 to $4,529.
• Individuals earning under $45,000 and were not eligible for the original State 3 Tax Cuts will now benefit from a tax rate reduction from 19% to 16%, which is a saving of $804 for someone earning in excess of $45,000.
• An individual earning $90,000 will receive a $1,929 tax cut from $1,125 under the original Stage 3 Tax Cuts.
Tax Planning Advice – Benefit to you
By forecasting your expected 2024 income and tax payable for all individuals and entities in your family group, we can develop strategies to “spread” your income across your family group in the most tax-effective way – and legally reduce your tax.
One of these strategies may be deferring income into the 2025 year so that you can take advantage of these updated Stage 3 Tax Cuts!
Our Plan
To achieve this extra benefit for you, our process is:
• Estimate the 2024 Taxable Income for all individuals and entities in your family group (around March)
• Estimate the initial 2024 Tax Payable for all individuals and entities
• Develop “income spreading” strategies to reduce your overall family group tax payable
• Advise you of tax reduction strategies for 2024 (April to June)
• Meet with you and answer any questions you may have about our tax reduction strategy advice
Tax Planning 2024
Deferring income and paying tax at a lower tax rate is a tax-saving strategy in its own right, but it is just one part of tax planning.
We are starting to work through our tax planning program for 2024, considering changes to tax laws, tax rulings (especially trusts), trust distributions, FBT, Superannuation, losses on property or investments, CGT, income spreading for Professionals, Budget changes, Instant Asset write-offs, etc.
Before 30 June 2024, there will be opportunities to reduce or save tax. Over the past two years, there have been substantial tax changes that need to be considered this year.
Next Steps
This newsletter is to make you aware of the options to reduce tax before the end of the financial year, to save you money and stress. We will send out an email soon (probably in March) on this. Our plan will also involve forecasting tax payments for at least the next 12 months so that you can allow for these in your Budgets and Forecasts.
There is nothing to do (yet); just be aware that proactive planning can save you tax.