New Financial Year: What You Need to Know

As the new financial year begins, here are some tips and updates to help you manage your money and taxes.

Stage 3 Tax Cuts: What is changing?

The Stage 3 tax cuts , which came into effect on 1 July 2024, are a significant change to the country’s tax system. These changes, now law, will see:

• a reduction in the 19% tax rate to 16%;

• The 32.5% tax rate will be reduced to 30%;

• the threshold above which the 37% tax rate applies will increase from $120,000 to $135,000, and

• the threshold for the 45% tax rate will rise from $180,000 to $190,000.
  

As a result of these changes, all Australian taxpayers who earn above the tax-free threshold, which is set at $18,200, will receive a tax cut. The new tax brackets will be as follows:

Superannuation: What's New and What to Do?

Another important aspect of the new financial year is the superannuation system, which has undergone some changes and reforms. Here are some of the key points to be aware of:

• The superannuation guarantee (SG) rate has increased from 11% to 11.50%, meaning that employers will contribute more to your super fund. This will boost your retirement savings, but may also affect your take-home pay and cash flow.

• The concessional contributions cap has increased from $27,500 to $30,000, allowing you to make more pre-tax contributions to your super fund and reduce your taxable income. You can also carry forward any unused cap amounts from the previous five years, if you meet certain eligibility criteria.

• The non-concessional contributions cap has increased from $110,000 to $120,000, allowing you to make more after-tax contributions to your super fund and grow your wealth. You can also use the bring-forward rule to make up to three years' worth of contributions in one year, if you meet certain eligibility criteria.

Budgeting: How to Plan and Track Your Spending?

Finally, the new financial year is a great opportunity to review your budget and set some financial goals. A budget can help you manage your income and expenses, save for the future, and avoid unnecessary debt. Here are some tips to help you create and stick to a budget:

• Start by listing your income sources and expenses categories, and estimate how much you earn and spend each month. You can use online tools, apps, or spreadsheets to help you organise your data. A great resource is the federal government’s MoneySmart Budget calculator.

• Identify your needs and wants, and prioritise your spending accordingly. You may be able to cut back on some discretionary expenses, such as entertainment, dining out, or subscriptions, and allocate more money to your savings, investments, or debt repayments.

• Set some realistic and specific financial goals, such as saving for a holiday, buying a car, or paying off a credit card. Write down your goals and track your progress regularly.

• Review your budget at least once a month, and adjust it as needed. You may need to account for changes in your income, expenses, or goals, and make sure your budget reflects your current situation and priorities.

A budget can help you take control of your finances and achieve your financial goals. However, it is not a one-size-fits-all solution, and you may need to experiment and find what works best for you.

To get a better understanding of your financial position and what your future may look like book a meeting in with one of our qualified financial advisers here.

RI Advice Sutherland