What will you do with your Stage 3 tax cut?
One option to consider is using it to boost your Self Managed Super Fund (SMSF) or Super Fund.
The Stage 3 tax cuts are one of a series of changes that came into effect on July 1. Other changes include:
- an increase in the Superannuation Guarantee Charge from 11% to 11.5%.
- increases to the standard concessional contribution cap and the non-concessional contribution cap as well as adjustments to Total Superannuation Balance thresholds.
Using your tax cut to boost Super is a tax effective way to use this money to save for your retirement.
What are the Stage 3 tax cuts?
On July 1, 2024, Australian income tax rates and thresholds changed to deliver a tax cut to every taxpayer.
- The 19% tax rate will reduce to 16%
- The 32.5%tax rate will reduce to 30%
- The 37% tax threshold will increase from $120,000 to $135,000
- The 45% tax threshold will increase from $180,000 to $190,000.
Table: Comparison of 2023–24 & 2024–25 individual income tax rates & thresholds
2023–24 Thresholds ($) | 2023–24 Rates (%) | 2024–25 Thresholds ($) | 2024–25 Rates (%) |
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 |
The Stage 3 tax cuts will deliver a tax cut of $1,804 to someone with an annual taxable income of $85,000. For those with an annual taxable income of $150,000 their tax cut is $3,729. If your annual taxable income is $250,000 your tax cut is $4,529.
Table: Tax cut by annual taxable income
Annual taxable income ($) | Tax cut ($) |
$85,000 | $1,804 |
$150,000 | $3,729 |
$250,000 | $4,529 |
Why boost Super?
Super is still the most tax effective vehicle for saving for your retirement. Putting your tax cut into your SMSF or super fund is a tax effective use of this money if you don’t want to spend it.
Standard concessional contributions are taxed at a ‘concessional’ rate of 15% rather than your personal income tax rate. With the annual contribution cap increasing from $27,500 to $30,000 on July 1, 2024, you may contribute an additional $2,500 at this low tax rate.
Remember, you can also make ‘carry-forward’ concessional super contributions if you have a total superannuation balance of less than $500,000. You can access your unused concessional contributions caps on a rolling basis for five years.
Expert help for business owners in managing an SMSF
With the rules regarding super constantly changing and compliance heavily regulated, expert advice can save you time and money as you maximise your super.
Pitcher Partners Newcastle and Hunter has a specialist superannuation team that understands the ins and outs of maximising super in an SMSF.
We support clients with SMSF audits, managing SMSFs, tax planning, SMSF compliance and administration and technical support. Our live reporting technology gives clients real time information on how their super portfolio is progressing.
Have a question about SMSFs?
We love questions. If you want to know more about Pitcher Partners Newcastle and Hunter’s superannuation (SMSF), business tax and advisory, and wealth management services, please contact us.
