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Individual income tax changes in 2024: What you need to know & how it affects you

income tax bracket changes 204

Understanding the latest tax bracket changes is crucial for effective financial planning as we approach the new fiscal year. Effective 1 July 2024, the Australian Government has announced significant adjustments to individual income tax rates and thresholds. Here’s a detailed guide to help you navigate these changes and optimise your tax strategies with Payroller’s efficient features.

Understanding the new tax rates and thresholds

Starting from 1 July 2024, individual taxpayers will experience a reduction in certain tax rates and an adjustment in tax brackets, as detailed below:

  • The tax rate for individuals earning within the 19% bracket will decrease to 16%.
  • Those falling in the 32.5% tax bracket will benefit from a reduced rate of 30%.
  • The threshold for the 37% tax rate will increase from $120,000 to $135,000.
  • The threshold for the top rate of 45% will rise from $180,000 to $190,000.

These changes, passed under the Treasury Laws Amendment (Cost of living tax cuts) Act 2024, aim to reduce the tax burden on individuals and support economic growth.

Impact and what the new tax brackets mean for you

The new income tax rate legislation offers an opportunity for taxpayers to retain more of their earnings. Whether you are an employee or a freelancer using Payroller’s services, these changes could impact how much tax you owe and your take-home pay:

Lower-income earners

Low-income earners will benefit from a decrease in the tax rate, possibly increasing their disposable income. However, since the reduction in the 19% tax rate is relatively modest compared to other changes, the overall impact on low-income earners may be less significant compared to middle and high-income earners.

Middle-income earners

Those near the upper limit of the previous 32.5% bracket may see considerable savings, which could influence investment strategies and savings plans. Additionally, the increase in the threshold for the 37% tax rate from $120,000 to $135,000 means that some middle-income earners may remain within lower tax brackets, further reducing their overall tax burden.

High-income earners

The increase in the threshold for the 45% tax rate from $180,000 to $190,000 means that high-income earners will be able to earn more income before reaching the top tax bracket. Adjustments in the higher tax brackets may alter net income, suggesting a need for revising financial plans.

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individual tax rates in 2024

Strategic financial planning with Payroller

Adjusting your settings and tax withholdings on your accounting or payroll software accurately is crucial to maximise the benefits of these tax bracket changes. Payroller offers features that can help you and your accountant streamline these adjustments seamlessly:

  • Payroller’s real-time tax calculations: Ensure that your payroll is always compliant with the latest tax rates and thresholds with real-time calculations.
  • Customisable payroll settings: You can easily adjust your payroll settings in Payroller to reflect updated tax withholdings, helping you avoid under or overpaying your income taxes throughout the year.

The 2024 tax bracket changes are designed to offer relief to taxpayers across various income brackets. By staying informed and leveraging Payroller’s intuitive features, you can ensure that your payroll processes remain compliant and optimised for these new tax laws.

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