The Prime Minister found himself in hot water last week.
Albo decided to water down the already legislated stage 3 tax cuts.
There was a lot of uproar about the changes, but the reality is that every Australian will be better off than they are today under the “new” tax cuts.
Four out of five Australians will have more disposable income from 1 July than they would have had under the “old” tax cuts.
So, what do the “new” tax cuts mean and how do they differ from the “old” tax cuts.
For some context, we have a tiered tax system in Australia whereby you pay more tax as you earn more:
From 1 July, the Government will drop the rate from 19 per cent to 16 per cent for incomes up to $45,000, drop the tax rate from 32.5 per cent to 30 per cent for incomes between $45,000 and $135,000, and retain the 37 per cent tax bracket, applying to workers earning more than $135,000, and lift the 45 per cent top tax bracket to incomes above $190,000.
Confused? Here is a good summary:
In practical terms it means someone earning $90,000 will have access to $1,900 more disposable income each year ($700 more than they would have under the “old” tax cuts).
Someone earning $120,000 will have access to $2,700 more disposable income each year ($700 more than they would have under the “old” tax cuts).
Someone earning $180,000 will have access to $3,800 more disposable income each year ($2,200 less than they would have under the “old” tax cuts).
Someone earning $250,000 will have access to $4,500 more disposable income each year ($4,500 less than they would have under the “old” tax cuts).
How much you earn will impact how you feel about the change. Every working Australian will have access to more disposable income. Anyone earning less than $150,000 is better off in the “new” changes, whereas anyone earning more than $150,000 is worse off in the “new” changes.
But ultimately, everyone is a winner.
No matter how much you earn, every single working Australian will have more disposable income from 1 July 2024 than they did on 30 June 2024.
This, along with the looming reduction to interest rates during the second half of 2024 will make a big impact on our borrowing capacities.
It means our borrowing capacity from 1 July could be tens, if not hundreds, of thousands of dollars higher than it is today.
It means more purchase power for would-be home buyers and investors.
It’s hard not to see those two factors translating into price growth, particularly during the second half of 2024.
The extra income will also help tenants with the inevitable rent increases that will continue through 2024.
That’s why it’s important that you do what you can when you can, particularly in the first half of 2024.
