Elevated News For the EA Community - February Newsletter

elevated news for the ea community february newsletter

Revised Stage 3 Tax Cuts

In January 2024 the government announced an amendment to the proposed stage 3 tax cuts that will result in a bigger tax cut for around 11 million low- and middle-income taxpayers. As a result, the first $18,200 will remain tax-free (as it is now), income between $18,201 and $45,000 will be taxed at 16%, income between $45,001 and $135,000 will be subject to 30% tax and earnings between $135,001 and $190,000 will pay 37% tax. Those earning over $190,000 will be taxed at 45%.

These changes are due to come into effect on 1st July 2024.

Summary of current and proposed tax brackets

2023-24 2024-25
Thresholds ($) Rates (%) Thresholds ($) Rates (%)
0 - 18,200 Tax free 0 - 18,200 Tax free
18,201 - 45,000 19 18,201 - 45,000 16
45,001 - 120,000 32.5 45,001 - 135,000 30
120,001 - 180,000 37 135,001 - 190,000 37
Over 180,000 45 Over 190,000 45

As of 1 January 2023, people aged 55 and older who sell their homes (and meet the requirements) can make a ‘downsizer’ contribution to their superannuation fund of up to $300,000 (or $600,000 per couple) from the proceeds of the sale. This is a tax-free contribution that can be made in addition to any concessional or non-concessional contributions.

If you would like to chat about this as an option moving towards retirement, please give us a call.

Risky Trust Distributions – the ATO’s final stance

The ATO has adopted a new compliance approach with regards to the ‘Section 100A’ rule that can apply when a beneficiary’s distribution arises from a reimbursement agreement. Section 100A is in place essentially to stop arrangements whereby a distribution is made to one beneficiary (likely on a low tax rate) but the economic benefit is transferred or paid to a second beneficiary (on a higher tax rate).

If you have any questions in relation to Trusts & tax implications give us a call to discuss.

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