In an attempt to provide cost of living relief, the Albanese government’s recent revision to the stage three tax cuts have flipped the benefit in favour of lower income earners. While opinions about the cuts are mixed, millions of Aussies will now see more money in their pockets from July 1.
Here’s how to calculate how much extra you’ll see in your bank account, and most importantly, how to make sure you maximise the extra capacity.
What tax cut will you get? How to work it out
Knowing how much extra money you’ll see in your bank account comes down to your specific salary and conditions.
To calculate your new tax rate, head to paycalculator.com.au and input your salary, whether it includes HECS/HELP and superannuation and any other criteria like part time hours, then scroll down to the tax table.
This will reveal your weekly, fortnightly, monthly and annual take home pay in the top panel. Above this table, use the drop down menu to change the tax year to 24/25. The numbers that populate are now indicative of your additional take home pay after the changes.
For example, a $60,000 per year earner, with no HECS/HELP and exclusive of superannuation will get an extra $22.92 per week, or $99.00 per month.
Now you know how much extra you’ll bring home each month, the next step is to work out how to maximise this extra money.
Plan how you’ll spend your extra money in advance
Now you know how much extra you’ll see in your account on payday after July 1, you need to decide how best to use that income.
Without a plan, these small extra amounts can easily absorb into your lifestyle in the form of lifestyle creep, and leave you in the same position as before. While the tax cuts won’t necessarily result in drastic changes to your financial capacity, an extra $99 per month can still be used to improve your life and your finances.
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It all adds up
The key thing to remember when it comes to small amounts is that repeated habits compound. It would be easy to let that $99 per month get swept up in your existing household budget, but with a plan in place, you can maximise it.
If you’ve got a mortgage, paying that $99 extra off your mortgage each month could see you mortgage free two years and eight months sooner – based on a $500,000 30 year loan with an interest rate of 7 per cent.
Put that $99 in a savings account and by Christmas you’ll have almost $600 to put towards holiday season expenses. Keep saving it until next July and there’s almost $1,200 stashed away for emergencies, or towards a family holiday.
Using that $99 to make a voluntary after-tax contribution to your superannuation each month means you can make a tax deduction next tax time – boosting your retirement savings and getting you more money back on your tax return.
Spend it strategically
If you know you’ll be putting your tax cut toward covering household expenses, it still pays to sit down and decide the most efficient use of your money.
Will you use it to bulk purchase household staples to get a cheaper per-unit price once per month? Will it go towards a debt payment to help you smash down the balance faster? Could it go towards an upcoming bill or expense, like car registration or your summer utility bill?
However you use your tax cut, check exactly what you can expect in your pay first so you can make an informed decision about how best to make use of a small increase to your bottom line.
Image credits: @bentalksmoney on TikTok, paycalculator.com.au