A financial planner’s advice for Aussies to minimise their tax after the government’s stage three tax cuts has sparked a war of words online.
James Wrigley, principal at First Financial in Melbourne, shared his thoughts on the changes kicking in from July 1, 2024, in a viral TikTok video on Sunday.
The tax cuts, started under the Coalition and supported by Labor, have been criticised by the Greens and progressive groups as disproportionately benefiting the wealthy, while costing the budget more than $300 billion over a decade.
“The big changes are the 32.5 per cent tax bracket is being reduced down to 30 per cent, the 47 per cent tax bracket is being scrapped altogether and the upper bracket and the upper bracket where you go over to 45 per cent tax is being pushed up to $200,000, where it currently sits at $180,000,” Mr Wrigley said in the video.
“If your income is in this bracket between $45,000 and $200,000 a year, that’s the vast majority of the Australian population, there’s some planning for tax events and structuring of your income and things that you will really want to take advantage of, either incur certain expenses this year or maybe try and push income into the new financial year if you can possibly do so.”
Mr Wrigley explained that because there was such a radical change in tax rates, it meant that “for the vast majority of people the amount of tax you’ll pay this year is higher than what you’ll pay next year, so any tax deductions that you can create for yourself this financial year are more valuable to you this year than what they will be next year”.
He suggested that investment property owners, for example, may be able to go to the bank and prepay their interest for the next financial year in the current financial year. “It’s a big lump sum of money you’ll have to come up with but some people can afford to do that,” he said.
Other deductions could come from concessional superannuation contributions, or general work-related expenses such as computer equipment.
“On the flip side, because tax rates will be lower next financial year, you want to actually try and push additional income into next financial year if you can possibly do so,” Mr Wrigley said.
“Some people have means of controlling the income they earn, if you earn a salary there’s not a lot you can do about that, but any investment assets you have. If for some reason you might be selling an investment asset — a share portfolio, an investment property — if you can delay the sale until next financial year … chances are you’ll probably pay less tax on that gain.”
He added that same applied for restructuring assets, such as moving assets from one’s own name into superannuation or a family trust.
“That’s a capital-gains tax event, there may be a lot of advantage in you delaying that,” he said. “And then for some that have private companies that declare dividends, if you can avoid declaring a dividend this financial and instead pay it in the new financial year, you may pay a whole lot less tax.”
Mr Wrigley went on to discuss financial planning strategies for people with family trusts under the new tax changes.
His video quickly went viral with more than 165,000 views in half a day — with many users appearing to be angry at the tax changes for benefiting wealthier Australians.
“How the hell it’s $45,000 and $200,000 in the same bracket it’s just insane,” one person wrote.
“War on the poor,” another said.
“The rich get richer,” a third said.
“What a horrible thing to do to citizens,” a fourth added. “People under $45,000 should get the break. The rich will get almost all of this. Costs $30 billion a year!”
Not everyone agreed, however, with some arguing taxes were still too high.
“Still taxing the middle class to death,” one wrote.
“Yeah lol, I’m not too happy about paying more tax than the average salary,” another said, adding a black hole emoji.
It comes after a social media in recent weeks was flooded with young Aussies complaining about getting a lower-than-expected refund or even a tax bill this year.
For many, the end of the low-and-middle income tax offset (LMITO) was the reason they received less back than they have become accustomed to over the past few years.
Introduced as a temporary measure in the 2018/19 federal budget, the “Lamington” meant those earning between $37,000 and $126,000 were eligible for a tax cut of up $1500 — but with the offset scrapped people are no longer getting that tax time boost.
Last month, a viral video of a 23-year-old worker raging in an expletive ridden rant after receiving a $2000 tax bill struck a nerve with many Aussies.
“Right, how the f**k do I owe the ATO $2000 when I gave them $48,000. The government is f**king every c**t like always,” Tyrone Northrop said.
He told Prime Minister Anthony Albanese that he should be “ashamed of yourself” for “not helping a brother out”.
But tax experts also weighed in, with Natalie Lennon from Two Sides Accounting calling “bulls**t” on people’s online whinges.
“Most of the errors that we are finding — people are sending me their tax returns and I am checking them — most of them are user errors from doing your own tax return,” Ms Lennon said.
She added that it was “totally fine to do your own tax return” so long as you pay attention to the details and understand how returns work.
— with Ally Foster