Essential Tips for Staying on Top of Business in the New Financial Year

The new financial year (July 1) brings tax and superannuation changes that will affect the hip pocket of most Australians.

RSM Australia Financial Services Director Grace Bacon has some tips and guides on how you can stay in on top of your finances in 2024 – and plan for some major changes that take effect in 2025.

“Planning at the start of the new financial year will give you time to get on top of things to ensure you don’t lose control of your affairs,” Ms Bacon says.

Stage 3 tax cuts

“From 1 July, the stage 3 tax cuts mean you’ll get more in your after-tax salary. These tax cuts aim to address bracket crept particularly for low to middle income families,” she says.

“If your annual income is less than $146,000, you will benefit from a larger tax cut than those on higher incomes.”

The 19% tax rate reduces to 16%, 32.5% tax rate to 30%, and the Government has raised the threshold at which the 37% tax rate applies from $120,000 to $135,000. The threshold at which the highest rate of 45% applies rises from $180,000 to $190,000.

Superannuation changes

The Superannuation Guarantee (SG) increases from 11% to 11.5% from 1 July 2024 and is expected to increase again to 12% from 1 July 2025 (it’s currently legislated to stay at this rate). Ms Bacon says this means employers must put more into employees’ super accounts.

The Concessional Contributions limit will increase to $30,000 from $27,500. These contributions include employer contributions, salary sacrifice and personal deductible contributions. Any contributions above this limit will attract an additional 15%. People on high incomes where the base salary is “plus” super may not be able to avoid this additional tax.

Non-concessional contribution limits will increase from $110,000 to $120,000 p.a. The bring forward rules will also increase to $360,000 over 3 years, from $330,000.

Subsidies you may receive

Every household will benefit from a one-off energy relief of $300 applied to electricity bills.

Pharmaceutical Benefit Scheme medicine costs will freeze at $31.60 per medicine for the next two years and pensioners will have a freeze applied for 5 years at $7.70 per medicine.

If you are receiving Centrelink benefits, the current deeming rates will be left unchanged for another 12months. Deeming rates were reduced during the pandemic and the current lower deeming rates are 0.25% to a maximum of 2.25%. 

Ms Bacon says this will provide some relief and certainty in a rising interest rate environment and help alleviate cost of living pressures. 

Help for students

Those with HELP debts, VET student loans, Australian Apprenticeship Support Loans and other student loans will have debts reduced, as the Government will use either CPI or the Wage Price Index (whichever is lower) to assess. 

“Loans will grow at the lower wage index rate of 3.2% rather than a 7.1% inflation rate, and the measure will be backdated to July 2023,” Ms Bacon says.

“The expected interest reduction on a $25,000 debt will be $1,120. This will indirectly ease the pressure on young people who may aspire to save for a first home or direct their surplus income to other financial goals.”

Watch out for 2025 changes
Some changes that will apply from 1 July 2025 are worth noting and may require more planning, Ms Bacon says. They include:

1.    Unused contribution caps – if you anticipate you will have surplus cash, you should consider using catch up contributions. If you have not used up your annual personal contribution limit of $27,500 you can use the previous rolling 5-year limit and make additional contributions to super, provided your super balance is below $500,000.

2.    Super paid on parental leave - from 1 July 2025, to help alleviate the superannuation gender gap, the Government will ensure that the superannuation guarantee of 12% will be paid as a contribution to superannuation funds for eligible parents accessing Government-funded Paid Parental Leave. If the legislation passes, from 1 July 2024, families will have access to an extra two weeks of leave (22 weeks total), which will increase to 24 weeks from July 2025 and 26 weeks from July 2026.

“Taking time out of paid work to care for children is a normal part of working life for both parents. Paying super on Government Paid Parental Leave will help normalise parental leave as a workplace entitlement, like annual and sick leave, and reduce the impact of parental leave on retirement incomes,” Ms Bacon says.

“This is a positive move to help close the gender retirement savings gap and ensure women are not financially penalised by motherhood.”

3.    Division 296 changes – If you have a super fund with a balance over $3million, an additional 15% tax will apply, bringing the total tax on this portion of your earnings to 30%.
“This is one of the more significant changes in superannuation legislation in recent years. If you have a self-managed super fund, it is advisable to consider the impact of this change to the underlying asset values and earnings within your fund,” Ms Bacon says.
“If this impacts you, it’s critical to seek financial and tax advice early to give yourself time to consider different options before 1 July 2025. This legislative change will not only impact your superannuation or pension fund but potentially your whole retirement strategy and succession planning considerations.”

4.    Pay day super from 1 July 2026 - The Government has legislated for super contribution payments to paid into employee super funds at the same time when wages are paid, instead of quarterly. 

“This will ensure employees are receiving super contributions in a timelier manner and means their funds are invested and working for them almost immediately rather than just four times a year,” Ms Bacon says.

Grace Bacon is the Director of RSM Financial Services Australia (AFSL 238 282), advising clients on wealth management, retirement planning and succession planning.
 

FOR MORE INFORMATION

If you would like to learn more about the topics discussed in this article, please contact your local RSM office.

This page has been prepared by RSM Financial Services Australia Pty Ltd ABN 22 009 176 354, AFS Licence No. 238282.

As everyone's circumstances are different and this article doesn't take into account your personal situation, it is important that you consider the above in light of your financial situation, needs and objectives, and seek financial advice before implementing a strategy.         

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