How your income will change next week
Millions of Australian workers will see the impact of Stage 3 tax cuts in their next pay packet
Millions of Australian workers will see the impact of Stage 3 tax cuts in their next pay packet
Stage 3 tax cuts will commence on Monday, providing 13.6 million workers with tax savings that they will see in their first pay packets of FY25. The average Australian wage earner on $74,500 per year will receive a $1,540 tax saving over the new financial year. The Superannuation Guarantee is also going up from 11 percent to 11.5 percent from Monday, providing the same worker with a $372 bump per annum to the superannuation payments they receive from their employer.
The Albanese Government amended the Stage 3 tax cuts in January to give every taxpayer a tax cut rather than only those on higher incomes. Many economists have argued the tax cuts will add to inflation, which is proving to be remarkably sticky. Yesterday, the Australian Bureau of Statistics released the May inflation figures showing a 4 percent annual increase in inflation, up from 3.6 percent in April.
The Federal Government decided to amend the legislated tax cuts in January to help more Australians with rising cost of living pressures. Official advice from the Federal Treasury said the amendments were “broadly revenue neutral” because they would cost almost the same amount as the original Stage 3 plan, which had already been factored into inflation forecasts. The amendments reduced the tax break for earners at the top end to enable tax relief for everyone. A Treasury document said the changes “will not add to inflationary pressures and will support labour supply”.
The tables below outline how the tax rates and tax brackets will change from Monday.
At a press conference after the Reserve Bank announced interest rates would remain on hold last week, Governor Michele Bullock said she expects some people would use their tax cuts to cover everyday expenses while others would save it.
“What we do observe in the data is that people who have mortgages – on average, not all – but people on average who have mortgages tend to try and put more into their offset accounts and their redraw facilities because they’re paying quite a high interest rate now on their mortgage and so they want to offset it,” she said.
A Westpac survey found Australians planned to save up to 80 cents for every $1 of tax savings.
“The results suggest consumers will use tax relief as an opportunity to repair their finances and rebuild saving buffers rather than spend,” said senior Westpac economist Matthew Hassan.
If taxpayers followed through on this plan, Mr Hassan said only $4.7 billion of the $23.3 billion in tax relief would be spent, equating to a spending boost of 35 basis points.
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As costs continue to mount, more Australians are feeling the weight of expectation to keep spending
More Australians are living beyond their means in order to keep up appearances, new data has revealed.
A survey by financial comparison site, Finder, has shown 30 percent, or 6.3 million people, have felt pressured into purchasing to keep up with family or friends. The research, which involved surveying 1,062 Australians, also showed 15 percent of people have gone into debt as a result.
The most common sources of over spending people felt pressured into included splitting an expensive restaurant bill despite ordering less (14 percent), taking an expensive holiday (11 percent) and buying tickets to an event (10 percent). However, six percent of Australians had bought a nice car and five percent had bought a house in order to keep pace with others.
Tellingly, the wedding industry made an appearance on the list, with five percent of people pressured into over extending for a bucks or hens night. Three percent reported feeling pressured to pay for someone’s baby shower.
Sarah Megginson, personal finance expert at Finder said ‘comparisonitis’ was exacerbated by social media consumption.
“Never before have we had such an intimate and behind the scenes view into other people’s lives – but it’s important to remember it’s a highlight reel,” Ms Megginson.
“The millionaire next door might be drowning in debt to afford that apparent life of luxury.”
She counselled against falling into the trap of living beyond your means because others appear to have more.
“Getting into debt, ruining personal finances and compromising your values are all very real risks when it comes to trying to keep up with what others have,” she said. “Success isn’t defined by what you have or where you holiday. Focus on future wealth by paying your debt off and dedicating more money to investments and savings than to material possessions.”
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