Confusion has surrounded the stage 3 tax cuts, initially approved by the Morrison Government, with Anthony Albanese pledging to maintain them if victorious in the 2022 election. However, recent modifications have altered the landscape, leading to a shift in who benefits from these changes. In this post, we’ll break down the pre-changes scenario, the proposed new plan, and what business owners should consider in light of these adjustments.
Pre-Changes Overview:
The original stage 3 tax cut plan was skewed towards higher-income individuals, offering minimal benefits to those earning less than $45k. The majority of savings were expected to flow to individuals earning over $120k, representing the top 14% of income earners in Australia. This setup prompted discussions about equity and fairness within the tax system.
The Proposed New Plan:
The proposed changes aim to redistribute the tax burden, particularly benefiting individuals earning the minimum wage or less (around $45k). Taxpayers within the $45k to $135k income range stand to gain the most, with estimates suggesting an increase of $800 to $930 compared to the initial plan. While high-income earners won’t receive as substantial returns as outlined in Scott Morrison’s plan, they will still contribute less in taxes compared to the prior arrangement. This adjustment seeks to create a fairer distribution of tax benefits.
What Business Owners Should Do:
As a business owner, it’s crucial to navigate these changes strategically. Engaging with your accountant for tax planning advice before June 30, 2024, is highly recommended. This proactive approach offers clarity on your tax outcome and provides the best chance to minimize tax before the end of the financial year. Additionally, it sets the stage for planning the 2025 financial year, where most of these changes will take effect. Being informed and proactive will empower you to make well-informed financial decisions for your business.
The evolving landscape of stage 3 tax cuts underscores the importance of staying informed and seeking professional advice. Business owners, in particular, should be proactive in engaging with their accountants for strategic tax planning. By doing so, they can navigate the changes effectively, optimise their financial outcomes, and position themselves for success in the upcoming financial year.