The Free Lunch of Stage 3 Tax Cuts: How to Make the Most of It

The upcoming stage 3 tax cuts are being hailed as a free lunch for many Australians. With the promise of an extra $350 to $4500 per year, it’s no wonder people are excited. But what does it really mean, and how can you make the most of this windfall?

The stage 3 tax cuts are coming, but how will you use the extra cash?

The Problem with Bracket Creep

Bracket creep is a phenomenon where rising income leads to paying higher income tax rates than intended. The stage 3 tax cuts aim to “flatten” income tax rates to reduce this creep. But with cost of living pressures still high, many workers are still struggling to make ends meet.

What You Can Do About It

So, what can you do with your newfound wealth? Here are a few tips to make the most of your stage 3 tax cut:

Contribute to Your Super

If you’re not feeling the pinch too acutely, consider shifting your extra cash into your superannuation through salary sacrificing. This could translate into a significant boost to your retirement savings. For example, a 30-year-old on $100,000 with average super who begins salary sacrificing their full tax cut can expect to be about $100,000 better off in retirement, according to the government’s super calculator.

Save It or Invest It

If you’d prefer quicker access to your tax cuts, consider saving or investing them. Work out how much extra you’ll be getting and consult your budget to see how much of it you could start saving. You could put it into a high-interest savings account or invest it, even just a little each month. Consider your investment timeframe, risk appetite, and access to the capital before investing.

Pick Something Purposeful

Your tax cuts don’t need to be rigidly spent on improving your personal finance. Think about something you’ve had in the back of your mind as “I’d love to do this if I just had a bit more money to spare.” Whether it’s tennis lessons, investing, or starting to save for the school holidays earlier in the year, give your tax cuts a purpose.

Pay Down Debt

Finally, using your tax cuts to get rid of any lingering debts is one of the best things you could do. Credit cards and high-interest loans should be the first thing in your firing line. Even just paying off a few Afterpay purchases early can go a long way.

Paying off debt is a great way to use your tax cuts.

Make the Most of Your Stage 3 Tax Cut

The stage 3 tax cuts are a welcome relief for many Australians. By following these simple tips, you can make the most of your newfound wealth and set yourself up for financial success.