The soon-to-be-legislated changes to personal tax rates from 1 July 2024 promise to lighten the tax burden for all individuals by reducing marginal tax rates and the tax brackets.
These changes have been met with some criticism, particularly by high-income earners who (unlike low and middle-income earners) were set to benefit under the current individual tax rate cuts. While low and middle-income earners will be better off under the soon-to-be-legislated cuts, those with income of $150,000 and above are not.
So What Do the New Personal Tax Rates Look Like?
With effect from 1 July 2024, the revised Stage 3 tax cuts will:
- reduce the 19 percent tax rate to 16 percent — for incomes between $18,201 and $45,000
- reduce the 32.5 percent tax rate to 30 percent — for incomes between $45,001 and the new $135,000 threshold
- increase the threshold above which the 37 percent tax rate applies, from $120,000 to $135,000
- increase the threshold above which the 45 percent tax rate applies, from $180,000 to $190,000
Are There Tax Planning Strategies To Consider?
Understanding the soon-to-be legislated changes to tax rates is crucial for effective tax planning. With reduced individual tax rates on the horizon from 1 July 2024, some individuals may choose to bring forward deductions to the current income year (FY24) to get more 'bang for buck' from their deductions (i.e. deductions being ‘worth more’ where the rate of tax is higher). Similarly, for those individuals receiving trust distributions, it might be time to consider distribution strategies going forward and whether distributions of income might be deferred to later years when the rate of tax is lower.
What Else Do Individual Taxpayers Need to Know?
All individual taxpayers can expect to pay less tax from 1 July 2024. For salaried employees this should mean more money hitting your bank account on payday and, in some cases (depending on circumstances) bigger refunds at tax time. This is always a positive outcome (albeit those on over $150k had been promised slightly more). Conversely, less taxes collected from income tax (which is its largest source of tax collection) may have negative impacts on overall and long-term economic outlook given high levels of debt.
Get in touch with BlueRock's Private Client Accounting team to understand how you can best plan for these changes and ensure the most tax-effective outcomes.
