Is the tax cut a ‘good thing’ or ‘bad thing’ for me?

The Government has confirmed the tax cut starting 1 July 2024 (i.e. 2025 financial year).

The idea is to provide more cashflow for the taxpayer (i.e. you) to ease cost-of-living pressures for Australian, as the living costs in Australia have significantly increased due to inflation.

As such, the tax cut (lower tax) being introduced is merely helping you get more money on each paycheck (i.e., weekly, fortnightly, or monthly, depending on your circumstances).

Question of asked:

How will it impact my tax refund?

There will be less tax refund for you during your tax return. However, it has been replaced with the idea of providing you with more cash flow in each paycheck that you receive. The technical example is provided below for further understanding.

Fiction imitation for example purposes:

• Comparison during each paycheck

In FY2024, Romero earns a gross income (before tax) of $1,000 each weekly. He will be transferred $838 by his employer after tax. However, during FY2025, as the tax cut has started on 1 July 2024, he will be transferred $857, $19 more than the previous year because of the tax cut (i.e. close to $1,000 if you multiply by 52weeks, if you were to work for the entire year).

• Comparison during tax return

As per the scenario above, Romero earned a gross income of $52,000. In comparison, Romero has a 32.5% (FY2024) tax rate and a 30% (FY2025) tax rate. As such, every $100 claim as a deduction will give you back a refund of $32.5 (FY2024) and $30 (FY2025), being slightly lower $2.50 from the prior years.

Below is tax rate table mentioned:

Source: https://treasury.gov.au/tax-cuts#:~:text=The%20Australian%20Government%20has%20legislated,rate%20to%2030%20per%20cent