Did you know that since 1 July 2024, the Stage Three Tax Cuts have been putting more money into the pockets of Australians earning over $40,000 annually?
Now, in 2025, it’s time to make the most of these changes.
With the amended Stage 3 Tax Cuts approaching, now is the perfect time to prepare your financial strategy to maximise these benefits.
Proper planning can help reduce liabilities, increase savings, and ensure compliance with tax laws.
Here’s how you can prepare for the upcoming tax cuts in 2025.
Stay Ahead Of Tax Law Updates
The Australian Taxation Office (ATO) frequently updates tax policies, and staying informed is essential for accurate tax planning.
The key areas to monitor include:
- Tax Rate Adjustments: The new tax rates reduce the 19% and 32.5% brackets to 16% and 30%, respectively. The 37% bracket now applies from $135,000 instead of $120,000, while the 45% bracket starts from $190,000 instead of $180,000.
- Deductions and Offsets: Changes to instant asset write-offs and concessional superannuation caps could impact deductions.
- ATO Compliance Focus: Increased scrutiny is expected on cryptocurrency transactions, rental income, and work-related deductions. Ensuring your records align with ATO guidelines can prevent audits or penalties.
Optimise Your Tax Deductions
Deductions play a critical role in reducing taxable income. Maximising available deductions requires careful record-keeping and an understanding of eligible claims.
| Deduction Category | Eligible Claims |
|---|---|
| Work-Related Expenses | Uniforms, tools, home office costs |
| Superannuation Contributions | Voluntary concessional contributions |
| Charitable Donations | Donations to ATO-registered charities |
| Investment Property Costs | Interest expenses, depreciation, repairs |
| Prepaid Expenses | Up to 12 months of deductible expenses |
Making tax-deductible super contributions, keeping receipts for donations, and tracking work-related expenses can significantly lower taxable income. Consulting a tax professional ensures all deductions are correctly applied.
Plan For The End Of The Financial Year (EOFY) Early
Waiting until the last minute can lead to missed opportunities. Proactive planning throughout the year ensures you make the most of available tax benefits.
- Monitor Income and Expenses: Regularly reviewing financial records helps identify tax-saving opportunities.
- Leverage Forecasting Tools: Using accounting software or consulting a tax expert can provide insights into future tax obligations.
- Manage Cash Flow Effectively: Ensuring sufficient liquidity prevents financial strain when tax payments are due.
Proper preparation reduces last-minute stress and helps in making informed financial decisions.
Maximise Your Superannuation Benefits
Superannuation remains one of the most tax-effective savings vehicles.
Consider these strategies:
- Make catch-up concessional contributions if your total superannuation balance was less than $500,000 as of June 30, 2023
- For SMSF members, consider using an unallocated contributions reserve to bring forward next year’s deductions
- Review your voluntary contribution strategy to align with the new tax rates
Adjust Investment Strategies To Align With Tax Cuts
Upcoming tax cuts may influence how you manage your investments. Strategic planning can help optimise returns and minimise liabilities.
Considerations for Investment Planning:
- Capital Gains Tax (CGT) Strategy: Holding assets for over 12 months qualifies for the 50% CGT discount. Timing asset sales to fall in a lower tax year can further reduce tax liabilities.
- Dividend Plans: Aligning dividend payouts with lower tax brackets can maximise tax benefits.
- Negative Gearing Benefits: Investment properties can generate tax-deductible expenses, reducing overall taxable income.
These strategies can help maintain financial stability while benefiting from tax reductions.
Utilise The Stage Three Tax Cuts
Since 1 July 2024, the Stage Three Tax Cuts have tackled bracket creep—where wage rises push you into higher tax brackets, reducing purchasing power.
| Taxable Income | Current Tax Rate | Tax Rate from July 1, 2024 |
|---|---|---|
| $0 – $18,200 | 0% | 0% |
| $18,201 – $45,000 | 19% | 16% |
| $45,001 – $120,000 | 32.5% | 30% |
| $120,001 – $135,000 | 37% | 30% |
| $135,001 – $190,000 | 37% | 37% |
| $190,001+ | 45% | 45% |
Anyone earning $40,000 or more benefits, with gains capping at $190,000—above that, the 45% rate applies unchanged. In 2025, delay taxable events like asset sales to keep income in lower brackets. Last year, bringing deductions forward—like catch-up super contributions or prepaid expenses—made sense to offset higher pre-cut rates.
Utilise The Tax Cuts For Business Growth
Businesses can take advantage of tax cuts by restructuring financial strategies.
- Instant Asset Write-Offs: Reviewing eligibility for asset purchases can reduce taxable income.
- Income Deferral and Expense Prepayment: Deferring income or prepaying expenses can strategically lower tax obligations.
- Business Restructuring: Shifting to a different business structure may improve tax efficiency.
Assessing these opportunities in advance can help businesses make cost-effective decisions.
Stay Compliant, Avoid Penalties
Let compliance be your buffer against any penalties. With any deduction being taken or a source of income claimed, good record keeping through accounting software backs you up. Lodge your returns on time; filing them late will cost you.You should cross check the details such as bank accounts and income figures to avoid errors. The ATO is stringent about compliance, thus, you want to be accurate.
Ready To Save More With KPG Taxation?
Tax cuts are coming, so are you all set to capitalise on them? At KPG Taxation, we just won’t help you file the returns; instead, we develop intelligent tax strategies that maximize your refunds while keeping you afloat with more money.
Whether it’s business finance planning, bookkeeping, or individual tax advice, our expert tax professionals will work on behalf of you and get the best results. Call today for your consultation; let’s build a tax plan that will suit you!
