How to make the most of your tax cuts
Most Australians are looking to the July 1 tax cuts as a way of boosting much needed take home pay to help pay the bills, but if you’re not in that position you should take advantage to making the most of this bit of extra cash.
Helpfully at the same time as putting these lower tax rates in place, the Federal Government has increased the amounts you can contribute to super. From July, the standard concessional contribution cap will increase from $27,500 to $30,000 and the concessional contribution rate will increase from $110,000 to $120,000.
So, to help you understand just how much money you will have in your pocked from July 1, I have broken it down to three levels of income, $70,000, $100,000 and $130,000 and detailed how much extra you can expect in take home pay.
|
Annual income |
Annual tax cut (proposed)
1 July 2024 |
Weekly increased in take home pay |
|
$70,000 |
$1,429 |
$27 |
|
$100,000 |
$2,179 |
$42 |
|
$130,000 |
$3,379 |
$ 65 |
For anyone over the age of 55, I believe the best investment option for this extra cash that will be finding its way into your pockets in July is to contribute it directly to your super as a concessional contribution that is without claiming a tax deduction for it.
Then when you do your tax return the following financial year, you can crunch the numbers with your tax agent, and they can decide whether or not you should claim it as a tax deduction retrospectively.
Once you do claim it as a tax deduction, you will incur a 15 per cent contribution tax, so its worth getting the advice from your tax agent first before you decide to claim it or not. If you do put these extra funds, just how much better off will you be?
Assuming you achieve of 8.5 per cent after tax year in year out, if you contribute an extra $27 a week of after-tax money to super over the next ten years, that is where you don’t claim a tax deduction for it, you will have an additional $24,800 in super.
If you contribute an extra $42 a week this will add $37,800 to you super balance and an extra $65 a week, will boost your super by $58,700.
So, if you are not counting on the tax cuts to help pay your bills, putting the money into super is a much better option then letting the money disappear as you know it will on stuff that doesn’t really matter.