Who doesn’t love a tax saving?
July 1st sees Aussie workers, including ADF personnel, pay less tax thanks to the arrival of Stage 3 tax cuts.
It means an uptick in take-home pay. But how much will you save on tax?
The table below shows the annual tax savings can range from $354 annually to $4,529 each year for high income earners.
Impact of Stage 3 tax cuts from 1 July 2024.
| Taxable income. | Annual tax saving. | Weekly tax saving. |
| $20,000 | 0$ | $0 |
| $30,000 | $354 | $6.80 |
| $40,000 | $654 | $12.57 |
| $50,000 | $929 | $17.86 |
| $60,000 | $1,179 | $22.67 |
| $70,000 | $1,429 | $27.48 |
| $80,000 | $1,679 | $32.28 |
| $90,000 | $1,929 | $37.09 |
| $100,000 | $2,179 | $41.90 |
| $120,000 | $2,679 | $51.51 |
| $140,000 | $3,729 | $71.71 |
| $160,000 | $3,729 | $71.71 |
| $180,000 | $3,729 | $71.71 |
| $200,000+ | $4,529 | $87.09 |
Source: Federal Treasury Tax Cut Calculator
The drawback of the latest tax cuts is that they will be drip-fed as part of your regular pay. So, what may seem a generous annual tax saving can be watered down when it is spread across 26 fortnightly pay days for ADF personnel.
For example, if you’re on a salary of $70,000 annually, the tax cuts can see you save $1,429 over the course of a year. Sounds good, right? The catch is that the fortnightly saving is just $54. And given today’s cost of living crunch, it’s easy for that sort of money to be gobbled up by regular expenses.
The good news is that there are ways to make the tax savings work a lot harder.
Here are three ideas to get you started.
Pay off your mortgage sooner.
Use your tax cuts to make extra repayments into an 100% Offset account attached to your home loan. If your home loan doesn’t have an Offset account you could still make extra repayments and then utilise a redraw facility.
In either case, these payments go straight to reducing the loan balance, meaning the monthly interest charge is lowered and more of each regular repayment reduces the loan principal.
Read more about your options here:
- How an offset account helps you to pay less interest on your home loan.
- Redraw versus offset. What’s the difference?
It’s a simple way to fast-track your way to living mortgage-free with generous savings in loan interest along the way.
Use tax cuts to grow savings.
Having a pool of emergency savings is always a good idea, and the new tax cuts can provide the funds needed to kick start or grow a pool of personal savings. It can be the start of saving for a personal goal, or simply having money on hand to pay unexpected bills.
See our range of saving account options.
Tip: When comparing savings products, you may want to consider one that offers a bonus introductory rate or one that provides a bonus rate for making monthly deposits and no withdrawals (forcing you to save!).
Grow your super.
Superannuation is a very long term investment, and that means it really benefits from compounding returns. Adding just a little extra to super from your own money can make a tremendous difference to the value of your final nest egg on retirement.
Head to MoneySmart’s online superannuation calculator to see how the tax cuts could grow your super.
For more ideas on how to pay off your home loan sooner, or growing savings, reach out to our Contact Centre on 1800 033 139 or visit your local branch to find out more.
Important note: This information is of a general nature and is not intended to be relied on by you as advice in any particular matter. You should contact us at Defence Bank to discuss how this information may apply to your circumstances.
