Using 1 July tax cuts to help grow your super
From 1 July 2024, every Australian taxpayer is eligible to benefit from tax cuts as the income tax rates decrease.
Also from 1 July 2024, the superannuation guarantee has risen from 11% to 11.5% - meaning employers are obligated to pay 0.5% more superannuation.
Let’s look at an example of what this could mean for you
For a person earning $120,000 a year, here’s what their income, tax and super contributions look like before and after the tax and superannuation guarantee changes.
Type
Per year (2023/24)
Per year (2024/25)
Salary
$120,000
$120,000
Less tax
($31,867)
($29,188)
Take-home pay (bank account)
$88,133 ($3,390 a fortnight)
$90,812 ($3,493 a fortnight)
Super @ 11%
$13,200
$13,800
Less tax on super 15%*
($1,980)
($2,070)
smartMonday account
$11,220
$11,730 ($510 extra a year)
smartMonday account
$11,220
Note: the medicare levy is not included in these tax calculations.
As you can see from the calculations in the table above, if you earn $120,000 per year before tax:
The tax cuts mean you’ll have an extra $103 in your pay check each fortnight.
The increase to superannuation guarantee payments mean you’ll receive an extra $510 into your smartMonday account.
But why stop there? The next question to ask yourself is:
Could you use some of your extra take-home pay to grow your super even further while still receiving more in your bank account AND reducing your overall tax?
By salary sacrificing and making voluntary contributions to your super, you contribute that money to your super account before it is taxed. This can be a tax effective way to save for retirement, but you must keep in mind that you won’t be able to access that money until you are retirement age, or you meet other super withdrawal criteria.
Continuing our example of a member earning $120,000 a year, they could salary sacrifice $2,000 a year into their super and, thanks to the 1 July tax cuts, their take-home pay would still be $50 a fortnight more than last financial year.
They would also reduce the overall tax they pay by $2,929 a year, because concessional contributions to super are taxed at 15% - a lower rate than income tax after the tax-free threshold of $18,500.
Here are the calculations.
Type
Per year 2024/25
Salary minus $2,000 a year salary sacrifice
$118,000
Less tax (new tax rates)
($28,548)
Take-home pay (bank account)
$89,452 ($3,440 a fortnight, $50 more than 2023/24)
Super @ 11.5%
$13,800
PLUS salary sacrifice
$2,000
LESS tax on super 15%*
($2,370)
smartMonday account
$13,430 ($2,210 more than 2023/24)
Note: the medicare levy is not included in these tax calculations.
Want help with growing your super?
Contact a smartCoach today!
1300 COACH 1 (1300 262 241)
smartcoach@smartmonday.com.au
Want more information?
Join our smartCoaches for one of our new financial year update sessions on 30 or 31 July 2024, at no extra cost.
The events will cover:
changes to super
changes to tax
how you can take action
*The concessional contribution cap is $30,000 and amounts over this amount will incur additional tax. Source: https://taxcuts.gov.au